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Applications of autonomous vehicles are found in various diversified fields including defense, agriculture, mining, and space exploration. For successful operation of an autonomous vehicle, the vehicle has to dynamically interact with the environment around it. This dissertation presents the development and implementation of a sensor component to represent the surrounding environment around an autonomous vehicle. The environment is modeled as a grid and each cell in the grid is assigned a traversability value. Each of the two algorithms, obstacle detection and terrain evaluation, have certain advantages and limitations. Also like any other sensor algorithm, these two algorithms have some uncertainties associated with their outputs. In my work these algorithms are fused together to complement the uncertainties and limitations of each of them, and outputs of the two algorithms are fused using the certainty factors approach.