The Pentagon believes only a quarter of Afghans in key areas support President Hamid Karzai's government.
In a fresh 152-page report to Congress, the U.S. military also says that the political will to tackle corruption "remains doubtful."
The Pentagon said the Karzai government has popular support in only 29 of the 121 districts believed to be the most strategically important to the war effort.
The report said a failure by the government to provide basic services, and the "exploitative behavior of some government officials" were helping the insurgents.
At the same time, the Pentagon noted that Taliban insurgents were coming under "unprecedented pressure" leading to tension and sporadic dips in morale.
The Pentagon also said Pakistan has shifted 100,000 of its troops from its Indian frontier to spearhead what the U.S. military calls an unprecedented crackdown on militants along the Afghan border.
The Pentagon said the offensives in the Federally Administered Tribal Areas and Northwest Frontier Province are putting a "high degree of pressure on enemy forces and reduced insurgent safe haven" in eastern Afghanistan.
The report comes ahead of Karzai's May 10-14 visit to Washington, where he will meet U.S. President Barack Obama and hope to ease concerns about the effectiveness of a costly deployment of 30,000 extra U.S. forces.
compiled from agency reports