The public had "false and inflated expectations" of what British troops could achieve in Iraq, the head of the armed forces has said.
Gordon Brown has said 1,000 British troops will come home by Christmas
Air Chief Marshal Sir Jock Stirrup told The Times that the government and the military had allowed British people to hope for too much in Basra.
But to say troops had failed in Basra was "completely misjudged", he said.
Sir Jock spoke as a report claimed that major changes in UK military policy were needed to defeat al-Qaeda.
The study by the Oxford Research Group think tank said the "war on terror" had been a disaster and Britain and the US should pull out of Iraq, which has become a jihadist training ground.
Sir Jock said the public was unaware of exactly what had been achieved in Basra.
He said that despite "some quite daunting odds" troops had been successful in the southern Iraqi city.
But he said it was up to the Iraqis, not the British, to rebuild Basra's society and infrastructure and "make it look like some sort of stable, secure, prosperous urban centre".
"I think we didn't do a good job, frankly, of setting out the strategic prospect. I'm talking here not just about the military," he added.
Sir Jock took over as chief of defence staff in April 2006.
Last week, he accompanied Gordon Brown on his visit to Iraq during the Conservative Party conference.
The Oxford Research Group's report said al-Qaeda had benefited from the removal of the Taleban regime in Afghanistan by coalition forces.
The terror network got a propaganda boost from the extraordinary rendition and detention of terrorism suspects, it said.
The report also warned against taking any military action against Iran.
Paul Rogers, author of the Towards Sustainable Security - Alternatives to the War on Terror report, said "every aspect" of the so-called war on terror in Iraq and Afghanistan has been counterproductive.
"From the loss of civilian life through to mass detentions without trial, in short, it has been a disaster," he said.
"Western countries simply have to face up to the dangerous mistakes of the past six years and recognise the need for new policies.
"Going to war with Iran will make matters far worse, playing directly into the hands of extreme elements and adding greatly to the violence across the region.
"Whatever the problems with Iran, war should be avoided at all costs - the mistakes already made will be completely overshadowed by the consequences of a war with Iran."
A Ministry of Defence spokesman said: "We haven't seen this report and therefore we are unable to comment."
Prime Minister Gordon Brown will address the House of Commons on Monday following his announcement that 1,000 British troops would be returning by Christmas.