For the accurate control of the air-fuel (A/F) ratio at transient condition, the traditional PID controller cannot achieve satisfactory results due to the inherent nonlinear characteristic and time delay of single cylinder engine. So, this paper constructed an improved fuzzy PID controller with dynamic time delay compensation. First, a model for single cylinder model was set up and a common fuzzy PID controller was applied to solve the non-linear problem. Then, a modified dynamic compensator was proposed to improve the time delay behavior inherited in single cylinder gasoline engine. And then, the compensator was coupled to the fuzzy PID controller and applied to the A/F ratio control of the engine under transient condition. The simulation results show that the improved fuzzy PID controller can not only compensate the non-minimum phase characteristic of the engine system caused by the time delay, but also adapt well to the nonlinear characteristics, and in return, the stability, accuracy and response speed of the control system are greatly improved.