A primary concern in current radar receiver design involves the critical issue of setting a threshold level that is optimal for all operating conditions. A novel adaptive thresholding technique is presented to maximize both receiver sensitivity as well as dual-tone signal instantaneous dynamic range (IDR) for digital wideband receivers. The additional constraint placed for signal detection improves the false alarm rate with minimal hardware increase due to the simplicity of the proposed algorithm. Using our adaptive thresholding technique, the dual-tone IDR is very much independent from the primary signal's strength. The receiver's maximum IDR remains in a constant range, between 30dB to 34dB, which is below the primary signal for primary signal strengths between -4dBm and -24dBm.Keywords -Digital wideband receiver, digital microwave receiver, adaptive thresholding, instantaneous dynamic range (IDR), and dynamic kernel function FFT.