The emergence of multiple antenna technology in IEEE 802.11n WLAN  has resulted in performance improvement in terms of throughput as well as transmission reliability as compared to legacy standards. Link adaptive transmission is critical to WLAN. Most of the existing algorithms for MIMO mode adaptation (between spatial multiplexing and diversity encoding) use fixed SNR switching thresholds for rate selection. The use of a fixed threshold in both MIMO modes, however, can only provide smaller throughput gain. The present studies on link adaptation do not consider the fundamental characteristic difference in the diversity encoding and spatial multiplexing encoding for MIMO. In this paper we propose a novel adaptive thresholding based optimal rate and MIMO mode (ORMM) algorithm for 802.11n wireless network. The proposed scheme adaptively switches between two SNR switching threshold vectors, separately determined for each MIMO mode analytically. Simulations over the Rayleigh fading channel shows that ORMM outperforms the existing approach of MIMO rate adaptation based on the use of fixed switching thresholds for rate selection.