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I experienced this issue with my CT200h. I considered returning to the dealer. I traced the issue to the engine braking "B" setting.

When the "B" setting is engaged, the cruise control will not set, even if the cruise control light is on. The cruise control will work perfectly once the engine braking setting is disabled.

I co not recall any mention of that in the manual, I may have overlooked it. IMHO, when cruise control is turned on, it should turn the "B" setting off.

I will write Lexus.
Just curious:

Why do you see the need to ever use the "B" mode? Are you afraid that your brakes are going to overheat? Do you routinely travel down long, steep grades?

I've had a Prius for years and never once used "B" mode and that includes numerous trips over the Grapevine and Cajon pass. I would much rather take advantage of the car's regenerative braking than use the engine to slow the car down.
 
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