A control system for a vehicle includes a camera disposed at a vehicle and having a field of view exterior of the vehicle. An image processor is operable to process image data captured by the camera to at least detect objects or other vehicles. The control system, responsive to determination of a traffic condition, is operable to control a steering system of the vehicle. Responsive at least in part to image processing of captured image data, the control system is operable to detect a lane splitting vehicle approaching or adjacent to the vehicle. With the vehicle traveling in an occupied traffic lane and responsive to detection of the lane splitting vehicle approaching the vehicle, the control system controls the steering system of the vehicle to move the vehicle in a direction away from a side region of the occupied lane at which the lane splitting vehicle is detected.