The Pentagon says Afghanistan's military is growing stronger but it will need substantial financial aid and additional training after the NATO-led troops withdraw from the country in 2014.
In its twice-a-year report to the U.S. Congress, the Defense Department said the Taliban was now less capable and less-popular, and controlled less territory than in 2011.
However, it warned that the Taliban remained resilient and wielded influence in several key rural areas, including districts near the capital.
The report reiterated Washington's longstanding accusation that Pakistan continues to provide "occasional support" to insurgents that target international coalition forces in Afghanistan.
Pakistan rejects the claim. NATO has said it intends to keep a training and advisory mission in Afghanistan after 2014.
Based on reporting by Reuters and AP