The Bush administration has challenged a report for the US Congress which says Iraq has met only three of the 18 targets used to measure progress.
The White House said the GAO had set the bar for success too high
The Government Accountability Office findings contrast with a White House study saying eight goals have been met.
The Pentagon said the GAO portrayed the situation only in "blacks and whites" and ignored "grey" areas of progress.
The report is the first in a series of assessments over the next month of the success of the US troop surge in Iraq.
General David Petraeus, the commander of US forces in Iraq, and Ryan Crocker, the US ambassador to Iraq, are due to deliver a full progress report to Congress in September, looking in particular at the effect of the surge.
The draft GAO report, leaked to the Washington Post, questioned whether some of the earlier, more positive assessment by the White House had adequately reflected the range of views within the government.
"While the Baghdad security plan was intended to reduce sectarian violence, US agencies differ on whether such violence has been reduced," the report said, according to the Post.
"Overall, key legislation has not been passed, violence remains high, and it is unclear whether the Iraqi government will spend $10bn in reconstruction funds."
The draft report, which is being "revised" before it is delivered to Congress on Tuesday, said a further two benchmarks have been "partially met".
A Pentagon spokesman said officials had made some "factual corrections" and "offered some suggestions on a few of the actual grades".
"We have provided the GAO with information we believe will lead them to conclude that a few of the benchmark grades should be upgraded from 'not met' to 'met'," Geoff Morrell said.
"The standard the GAO has set is far more stringent. Some might argue it's impossible to meet."
White House spokesman Tony Snow also said the GAO's conclusions were unrealistic.
He said the GAO set the bar for success too high and did not assess whether progress had been made towards the benchmarks.
"The real question that people have is, 'What's going on in Iraq?' Are we making progress? Militarily, is the surge having an impact? The answer is 'Yes'," he said.
Police overhaul 'urged'
In addition, Pentagon officials also questioned some of the reported recommendations of an independent commission established by Congress to assess Iraq's security forces.
The US says the Iraqi police force has been infiltrated by militias
The commission has concluded that rampant sectarianism within the Iraqi police force requires that its current units "be scrapped" and reshaped into a smaller, more elite organisation, a US official has told the New York Times.
The recommendation is that "we should start over," the official said.
Headed by Gen James L Jones, the former top US commander in Europe, the 14-member panel of former or retired military officers is scheduled to present its findings next week.
The Pentagon spokesman said the US military had already begun a programme to retrain the Iraqi police.
Officials believed that they could rid the force of sectarianism without instituting a complete overhaul, he said.