In this paper, an adaptive synchronization scheme is proposed for a class of nonlinear systems. The design utilizes an adaptive observer, which is quite useful in establishing a transmitter-receiver kind of synchronization scheme. The proposed approach is based on contraction theory and provides a very simple way of establishing exponential convergence of observer states to actual system states. The class of systems addressed here has uncertain parameters, associated with the part of system dynamics that is a function of measurable output only. The explicit conditions for the stability of the observer are derived in terms of gain selection of the observer. Initially, the case without uncertainty is considered and then the results are extended to the case with uncertainty in parameters of the system. An application of the proposed approach is presented to synchronize the family of N chaotic systems which are coupled through the output variable only. The numerical results are presented for designing an adaptive observer for the chaotic Chua system to verify the efficacy of the proposed approach. Explicit bounds on observer gains are derived by exploiting the properties of the chaotic attractor exhibited by Chua's system. Convergence of uncertain parameters is also analyzed for this case and numerical simulations depict the convergence of parameter estimates to their true value.