The rapid development of power electronics interfaced generations such as wind, PV and HVDC systems pose significant operational challenges to the future AC power system due to deficiency of inertia and damping. This paper proposes a novel Virtual Synchronous Generator (VSG) scheme which adds adaptive inertial time constant and damping coefficient to optimise overshoot level and reduce frequency adjustment time during grid disturbances. The VSG small-signal model is established to analyze the influence of different control parameters on the performances of VSG, and stability of the proposed control scheme relative to the conventional schemes with fixed parameter. The credibility of the proposed control scheme is tested in an illustrative power system model consisting of a VSG and a SG simulated in MATLAB Simulink environment, and simulation results prove that the proposed control scheme has superior dynamic performance over the conventional VSG scheme existed in open literature.