A vehicle's response is predominately defined by the tire characteristics as they constitute the only contact between the vehicle and the road; and the surface friction condition is the primary attribute that determines these characteristics. The friction coefficient is not directly measurable through any sensor attachments in production-line vehicles. Therefore, current chassis control systems make use of various estimation methods to approximate a value. However a significant challenge is that these schemes require a certain level of perturbation (i.e. excitation by means of braking or traction) from the initial conditions to converge to the expected values; which might not be the case all the time during a regular drive. This study proposes an observer scheme that utilizes an instrumented tire (i.e. smart tire) as an additional sensor input and develops a sliding-mode observer based on tire force feedback to provide the estimated friction coefficient irrespective of the available excitation. The observer dynamics are derived using wheel rotational dynamics integrated on a single-track vehicle model to account for load transfer effects. The paper is concluded with a case-study on the use of the estimated friction values in improving vehicle braking performance. The proposed methods are tested through numerical analysis under MATLAB/Simulink® environment using the vehicle model from CarSim® software.