A new approach to adaptive control of linear systems abandons the traditional certainty-equivalence concept and treats the control of linear plants with unknown parameters as a nonlinear problem. A recursive design procedure introduces at each step new design parameters and incorporates them in a novel Lyapunov function. This function encompasses all the states of the adaptive system and forces them to converge to a manifold of smallest possible dimension. Only as many controller parameters are updated as there are unknown plant parameters, and the dynamic order of the resulting controllers is no higher (and in most cases is lower) than that of traditional adaptive schemes. A simulation comparison with a standard indirect linear scheme shows that the new nonlinear scheme significantly improves transient performance without an increase in control effort.< <ETX xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">></ETX>