A retarder (140) in a vehicle (102) is automatically controlled based on conditions including a current setting of the retarding control, downhill grade, speed, current gear, and impending gear change. With the retarder control set in the high position, when the vehicle (102) is operating at a downhill angle greater than the low angle threshold and less than the high angle threshold, and the pending gear is a large step downshift, automatically setting a retarder level to a low retarder level. When the vehicle (102) is operating on level ground and the pending gear is a large step downshift or the current gear is first or second gear, automatically setting the retarder level to off. When the vehicle (102) is operating on flat ground and the deceleration is above a trigger level, automatically setting the retarder level to a low retarder level.