The Infostation concept has been proposed to provide convenient and cost effective access to high-speed mobile data services. An efficient IP packet transmission protocol is required to compensate for the high error rate inherent to fading radio channels. In this paper, a novel link layer retransmission scheme is proposed. Using the channel state and fading state estimators, the scheme adjusts the retransmission parameters dynamically in order to achieve the optimum performance under time-varying channel conditions. A theoretical analysis is presented for the case of a random error channel. Furthermore, a simulation tool is developed for evaluating the performance of the scheme in a fading channel with various parameters. The analysis and simulation results show that this new retransmission scheme can provide substantial improvement over traditional schemes. It gives a robust performance in both slow and fast fading conditions. In addition, the algorithm's sensitivity to parameter values and channel characteristics, such as Doppler frequency and fading statistics, is investigated. A unique attribute of this algorithm and performance analysis is that throughput is evaluated in IP packets rather than in physical layer packets.