A control system and method utilize an exhaust oxygen (O2) sensor and a controller configured to operate a turbocharged engine in a scavenging mode, and while the operating the engine in the scavenging mode: command a target in-cylinder air/fuel ratio (FA) for achieving a target exhaust gas FA, adjust the measurement of the exhaust O2 sensor based on a scavenging ratio and the target in-cylinder FA to obtain a modified O2 concentration, adjust an exhaust system temperature modeled by a thermal model to obtain a modified exhaust system temperature, and adjust the target in-cylinder FA based on the modified O2 concentration and the modified exhaust system temperature.