This paper presents a nonlinear adaptive excitation control scheme to enhance the dynamic stability of multimachine power systems. The proposed controller is designed based on the adaptive backstepping technique where the mechanical power input to the generators and the damping coefficient of each generator are considered as unknown. These unknown quantities are estimated through the adaption laws. The adaption laws are obtained from the formulation of Lyapunov functions which guarantee the convergence of different physical quantities of generators such as the relative speed, terminal voltage, and electrical power output. The proposed scheme is evaluated by applying a three-phase short-circuit fault at one of the key transmission lines in an 11-bus test power system and compared with an existing backstepping controller and conventional power system stabilizer (CPSS). Simulation results show that the proposed scheme is much more effective than existing controllers.