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The system architecture for an adaptive multiple input multiple output (MIMO) radar-communication transceiver is proposed. A waveform design approach for communication data embedding into MIMO radar pulse using M-ary position phase shift keying (MPPSK) waveforms is introduced. A waveform optimization algorithm for the adaptive system is presented. The algorithm aims to improve the target detection performance by maximizing the relative entropy (RE) between the distributions under existence and absence of the target, and minimizing the mutual information (MI) between the current received signals and the estimated signals in the next time instant. The proposed system adapts its MPPSK modulated inter-pulse duration to suit the time-varying environment. With subsequent iterations of the algorithm, simulation results show an improvement in target impulse response (TIR) estimation and target detection probability. Meanwhile, the system is able to transmit data of several Mbps with low symbol error rates.