This paper describes a lateral disturbance compensation algorithm for an application to a motor-driven power steering (MDPS)-based driver assistant system. The lateral disturbance including wind force and lateral load transfer by bank angle reduces the driver's steering refinement and at the same time increases the possibility of an accident. A lateral disturbance compensation algorithm is designed to determine the motor overlay torque of an MDPS system for reducing the manoeuvreing effort of a human driver under lateral disturbance. Motor overlay torque for the compensation of driver's steering torque induced by the lateral disturbance consists of human torque feedback and feedforward torque. Vehicle-driver system dynamics have been investigated using a combined dynamic model which consists of a vehicle dynamic model, driver steering dynamic model and lateral disturbance model. The human torque feedback input has been designed via the investigation of the vehicle-driver system dynamics. Feedforward input torque is calculated to compensate additional tyre self-aligning torque from an estimated lateral disturbance. The proposed compensation algorithm has been implemented on a developed driver model which represents the driver's manoeuvreing characteristics under the lateral disturbance. The developed driver model has been validated with test data via a driving simulator in a crosswind condition. Human-in-the-loop simulations with a full-scale driving simulator on a virtual test track have been conducted to investigate the real-time performance of the proposed lateral disturbance compensation algorithm. It has been shown from simulation studies and human-in-the-loop simulation results that the driver's manoeuvreing effort and a lateral deviation of the vehicle under the lateral disturbance can be significantly reduced via the lateral disturbance compensation algorithm.