Many marine missions demand the autonomous underwater vehicle (AUV) to track a desired target point. However, the cyber- and physical-constrained characteristics on AUV make it challenging to achieve the tracking task. This paper investigates the tracking control of AUV, subjected to time-varying communication delay and unmeasurable velocity. We design a model-free proportional-derivative (P+D) controller to enforce the position tracking of AUV. It is noted that the velocity of AUV is not always acquired in water. Then, a terminal sliding mode-based observer is developed to estimate the velocity of AUV. Meanwhile, Lyapunov functions are constructed to analyze the stability, through which the stability conditions of velocity observer are presented. Finally, simulation results are performed to validate the effectiveness.