In order to improve TCP performance in networks with large round trip time, a method using a PEP (Performance Enhancing Proxy) is proposed. In the method, the PEP is located on a intermediate router along a TCP connection, and returns acknowledgment packets (premature ACKs) to the source host instead of the destination host. In previous researches, although a congestion control in the PEP which keeps the number of prematurely acknowledged packets below a threshold (watermark) value has been proposed, packet losses are not taken into account, and consequently performance of the PEP under a packet-loss environment has not been investigated. In this paper, we incorporate a retransmission control to deal with packet losses into the congestion control. The proposed retransmission control mainly has two functions. One is to return duplicate premature ACKs or partial premature ACKs to urge the source host to execute the fast retransmission. The other is to retransmit prematurely acknowledged packets to the destination host, when a timeout occurs or three duplicate acknowledgments and a partial acknowledgment from the destination host are received. Simulation results under a packet-loss environment show that the PEP improves throughput larger as the end-to-end propagation delay becomes larger and throughput with PEP is a maximum of four times as much as throughput without PEP.