Play and clunk of a driveline are controlled in a powertrain system having multiple torque generative devices and torque controllers using a multivariable control approach to provide active driveline damping. The control parameters used by a state estimator will vary depending on whether the final drive clearance is being balanced or is currently loose. When the estimated driveline axle torque is substantially non-zero, the nominal parameters for the transmission mode or gear are used in the state estimator. If the estimated axle torque is substantially zero, the parameters are switched to neutral parameters, the game estimator indicates a neutral game state, and the angle of the game is tracked until it accumulates an expected amount of play in the final drive. During a game transmission time, the active damping controls the speeds of the driveline components such that the effect of lash adjuster is minimized. After a clearance compensation occurs, the system uses the desired axle torque.
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