A driver assistance system for a vehicle includes a camera disposed at and viewing forwardly through a windshield of the equipped vehicle and operable to capture image data. A control operable to process captured image data utilizing algorithmic decision-making, which uses an edge detection algorithm. The control is operable to process captured image data to detect a pedestrian present in the field of view of the camera. The control is operable to process captured image data to detect an oncoming headlight or a leading taillight of another vehicle ahead of the equipped vehicle. Responsive to pedestrian detection, the control is operable to generate an alert to a driver of the equipped vehicle. Responsive to detection of an oncoming headlight or a leading taillight of another vehicle ahead of the equipped vehicle, a light beam of a headlight of the equipped vehicle is adjusted.