This paper describes the design, development and analysis of an adaptive predictive wide-area damping controller (WADC) which is employed to enhance transient stability of a two-area power system. Based on system identification and adaptive generalised predictive control, the proposed controller is used in such a way that its output signal is added to the excitation system of the already chosen generator. A state-variable-based adaptive generalised predictive control formulation has been employed in this work. In order to increase the effectiveness of the proposed controller, a modified-regulated variable has been used which utilises the outputs at the previous instants to generate the input of predictive controller. For identifying the system model, a recursive least-squares algorithm (RLSA) has been used. The results obtained from the simulation studies clearly show the effective damping of inter-area oscillations as well as the reduction in effect of time-delay in remote signals by the proposed controller.