We pose and solve an extremum seeking control problem for a class of nonlinear systems with unknown parameters. Extremum seeking controllers are developed to drive system states to the desired set-points that extremize the value of an objective function. The proposed adaptive extremum seeking controller is "inverse optimal" in the sense that it minimizes a meaningful cost function that incorporates penalty on both the performance error and control action. Simulation studies are provided to verify the effectiveness, of the proposed approach. (C) 2003 Elsevier Science Ltd. All rights reserved.