A vehicular driving assist system includes an in-cabin camera disposed at an interior rearview mirror assembly in an interior cabin of a vehicle and viewing at least a steering wheel of the vehicle and capturing image data. An electronic control unit (ECU) includes an image processor for processing image data captured by the in-cabin camera to detect presence of one or both hands of a driver of the vehicle at the steering wheel. The vehicular driving assist system, responsive to determining, via processing at the ECU of image data captured by the in-cabin camera, that at least one hand of the driver is not on the steering wheel when the vehicle is at or approaching a hazardous condition, generates an alert to the driver of the vehicle.