Modern lower limb prostheses are devices that replace missing limbs, making it possible for lower limb amputees to walk again. Most commercially available prosthetic limbs lack intelligence and passive adaptive capabilities, and none available can adapt on a step by step basis. Often, amputees experience a loss of terrain adaptability as well as stability, leaving the amputee with a severely altered gait. This work is focused on the development of a semi-active damping system for use in intelligent terrain adaptive ankle prostheses. The system designed consists of an optimized hydraulic cylinder with an electronic servo valve which throttles the hydraulic fluid flowing between the cylinder’s chambers, acting on the prosthesis joint with a moment arm in series with a carbon spring foot. This provides the capability to absorb energy during the amputees gait cycle in a controlled manner, effectively allowing the passive dynamic response to be greatly altered continuously by leveraging a small energy source. A virtual simulation of an amputee gait cycle with the adaptive semi-active ankle design revealed the potential to replicate adaptive abilities of the human ankle. The results showed very similarly that irregularities in amputee biomechanics can be greatly compensated for using semi-active damping.