This paper presents a new approach to imaging that significantly enhances the dynamic range of a camera. The key idea is to adapt the exposure of each pixel on the image detector, based on the radiance value of the corresponding scene point. This adaptation is done in the optical domain, that is, during image formation. In practice, this is achieved using a spatial light modulator whose transmittance can be varied with high resolution over space and time. A real-time control algorithm is developed that uses acquired images to automatically adjust the transmittance function of the spatial modulator. Each captured image and its corresponding transmittance function are used to compute a very high dynamic range image that is linear in scene radiance. We have implemented a video-rate adaptive dynamic range camera that consists of a color CCD detector and a controllable liquid crystal light modulator. Experiments have been conducted in scenarios with complex and harsh lighting conditions. The results indicate that adaptive imaging can have a significant impact on vision applications such as monitoring, tracking, recognition, and navigation.