A driving separation indication system for a vehicle includes an imaging sensor, a control and at least one indicator. The control is operable to process an image captured by the imaging sensor representative of a scene occurring exteriorly of the subject vehicle and to detect another vehicle via processing of the image. The control is operable to determine a threshold interspacing distance in response to a speed of the subject vehicle, and is operable to determine a distance from the subject vehicle to the detected other vehicle. The control is operable to at least occasionally actuate the indicator in response to the distance from the subject vehicle to the other vehicle being less than or equal to the threshold interspacing distance. The control may generally continuously determine the speed of the vehicle and the threshold interspacing distance to provide an appropriate threshold interspacing distance.