A time-domain model of the analog adaptive interference cancellation system (AAICS) involving both the interference and the desired signal is proposed. The stability, interference cancellation ratio, and convergence time of the AAICS are analyzed in detail. In addition, the desired signal cancellation ratio is taken into account in order to evaluate the system performance and optimize the AAICS more accurately. It is found that the parameters including the loop gain and the time constant of the negative feedback control loop need to be set reasonably so as to reduce a great distortion to the desired signal. The rules of parameter optimization are obtained for the AAICS operating in high frequency. Experiments are carried out to demonstrate the system's performance varying with parameters, and experimental results are in agreement with theoretical analysis, which is of great value for the optimization design of the AAICS.