In this paper, a new design method for model reference sliding mode control (SMC) based on controller gain adaptation idea is given with application to dynamic stability control problem of road vehicles. In conventional SMC, the knowledge of bounds of uncertainties and disturbances, chattering in control signal and lack of robustness during reaching time are important problems. But, in the proposed method: 1) there is no need to the knowledge of bounds of the uncertainties and disturbances 2) there is no chattering in control signal 3) the controller is robust for all time since there is no reaching mode. The reaching time elimination and chattering avoidance are not new, the novelty of the proposed method lies in the controller structure and adaptation of the controller gain, where a new PI type gain update mechanism is introduced to make the controller overcome the uncertainties and disturbances faster and more accurately. The stability of the controller is proved by using Lyapunov's stability theory. The proposed method applied to dynamic stability control problem of road vehicles. The controller is designed by using 2DOF linear vehicle model and the simulations of the controller have been studied with 7DOF nonlinear vehicle model. The performances of the proposed dynamic stability controller have been tested in various driving conditions and the robustness of the controller against modeling and parameter uncertainties of the vehicle in addition to external yaw disturbances caused by side wind, yaw disturbance moment, etc. has been shown. The simulation results illustrate the effectiveness of the proposed controller.