An improved method and apparatus for estimating driveline lash in a vehicle powertrain is provided herein. The method includes: determining if the powertrain is transitioning through driveline lash, e.g., driver commanded torque value changes sign, and then stays between a minimum and maximum commanded torque threshold for a calibrated time; if the powertrain is transitioning through driveline lash, determining when the driveline lash is taken up, e.g., when the transmission output acceleration exceeds a threshold minimum output acceleration, and thereafter changes sign; determining when the estimated lash state changes from neutral to a positive or negative state, which may be inferred from the axle torque estimate behavior; determining the time difference between when the driveline lash is taken up and when the estimated lash state changes from neutral to a positive or negative state; and updating the adaptive lash estimate if the aforementioned time difference is not equal to zero.