The present invention provides for a simulation-based system and method for driver instruction using a highly sophisticated physical and computer-based simulation system combined with a novel simulation-based instruction methodology that allows a novice driver to learn driving fundamentals and advanced defensive driving skills in the safety of the simulator environment. The novelty of the present invention lies in the driving simulation aspect of the driver instruction disclosed herein combined with the novel method of instruction disclosed herein. The simulation-based system and method provides numerous advantages over any other driving instruction system or method currently in use or known in the art.