For compliance with future more stringent emission standards exhaust emissions must be reduced. One possibility is to improve air-fuel ratio control quality. The approach presented in this paper uses virtual sensors to get a rough picture of the spatial distribution of lambda and oxygen storage states across the catalyst. This additional process information is gathered by means of a novel model for three-way catalysts. A state-space controller is used to maintain oxygen storage states predicted by the model at desired levels. The proposed control strategy has been implemented on a turbocharged, direct injection engine and successfully validated by means of emission measurements. A comparison with a commonly used air-fuel ratio control strategy is presented.