A method and system for controlling downshifting in an automated mechanical transmission system (10) utilized on a vehicle. When an automatic power downshift from a currently engaged ratio (GR) is required, the engine acceleration (EA) is monitored and compared with an engine free acceleration (EFA) to detect a false Neutral condition and to take appropriate action accordingly. Alternatively, a false Neutral condition is detected when the Absolute Value of the rotational speed of the output shaft (OS) times the currently engaged gear ratio (GR) minus the rotational speed of the input shaft (IS) is less than a predetermined value (ABS((OS*GR)−IS)).