A method and system for adaptively controlling a diesel engine to account for variations in the cetane number of the diesel fuel being used. An engine controller includes various control modules with algorithms for estimating the fuel cetane number, or determining the ignition delay that the engine is experiencing, or both. With this information, the controller can adjust the amount of exhaust gas recirculation that is used, thus varying the amount of oxygen that is available in the intake charge to burn the fuel. The controller can also adjust the timing of the fuel injection event, as another way of altering the nature of combustion. Using these techniques, the controller can optimize the engine operation based on the fuel currently being used.