This research aimed to find out the effects of in-vehicle distractions and time-gap settings with a fix-based bus driving simulator in a following scenario. Professional bus drivers were recruited to perform in-vehicle tasks while driving with adaptive cruise control (ACC) of changeable time-gap settings in freeway traffic. Thirty subjects were divided equally into three groups for different in-vehicle task modes (between subjects), including no task distraction, hands-free, and manual modes. Further, time-gap settings for the experimental ACC were: shorter than 1.0 s, 1.0-1.5 s, 1.5-2.0 s, and longer than 2.0 s (within subjects). Longitudinal (mean headway, forward collision rate, and response time) and lateral control (mean lateral lane position and its standard deviation) performance was assessed. In the results, longitudinal control performance was worsened by both shorter time-gaps and heavier in-vehicle tasks. But the interaction indicated that the harm by heavier in-vehicle distraction could be improved by longer time-gaps. As for the lateral control, it would only be negatively affected by shorter time-gap settings. This research indicates the effects of time-gaps and in-vehicle distraction, as well as the interaction. Proper time-gap selection under different in-vehicle distractions can help avoid accidents and keep safe.