A key component in any image-based tracking system is the adaptive tracking algorithm used to segment the image into potential targets, rank-and-select the best candidate target, and the gating of the selected target to further improve tracker performance. This paper will describe a new adaptive tracker algorithm added to the naval threat countermeasure simulator (NTCS) of the NATO-standard ship signature model (ShipIR). The new adaptive tracking algorithm is an optional feature used with any of the existing internal NTCS or user-defined seeker algorithms (e.g., binary centroid, intensity centroid, and threshold intensity centroid). The algorithm segments the detected pixels into clusters, and the smallest set of clusters that meet the detection criterion is obtained by using a knapsack algorithm to identify the set of clusters that should not be used. The rectangular area containing the chosen clusters defines an inner boundary, from which a weighted centroid is calculated as the aim-point. A track-gate is then positioned around the clusters, taking into account the rate of change of the bounding area and compensating for any gimbal displacement. A sequence of scenarios is used to test the new tracking algorithm on a generic unclassified DDG ShipIR model, with and without flares, and demonstrate how some of the key seeker signals are impacted by both the ship and flare intrinsic signatures.