Gen Dannatt's speech is being seen as his most outspoken yet
The head of the Army wants to re-structure the service to give soldiers more time with their families.
General Sir Richard Dannatt said units should not be sent on operations for more than six months out of every 36.
He said the British Army was "under-manned" and it was not unusual for deployments to be only a year apart.
Defence Secretary John Hutton said pulling UK troops out of Iraq would allow commanders to give soldiers longer breaks between postings.
British troops are due to leave Iraq by the end of July.
Speaking during a visit to troops in Afghanistan, Mr Hutton told the BBC: "I agree with what the general has said.
"We have accepted that the strain of mounting two major operations - one in Iraq and one in Afghanistan - is creating very substantial strain and stress on our military forces.
"But the removal of most of the combat forces from Iraq will allow us to take stock and to refresh and renew ourselves."
Earlier, in a speech on the state of the Army, Sir Richard said: "Many families and marriages have unfortunately fallen victim to the relentless pace of operations."
Gen Dannatt also criticised delays in the delivery of new equipment.
Speaking at think tank, the Institute for Public Policy Research, he said servicemen and women had been "seriously stretched" by years of fighting in Iraq and Afghanistan.
He said that under his proposed restructuring, time between overseas deployments would rise to 30 months from two years.
The restructuring would aim to offer British troops what Gen Dannatt called a more reasonable lifestyle.
Shadow defence secretary Liam Fox agreed with the sentiments expressed by the general and called for an urgent strategic defence review to ensure military commitments can be matched with resources.
Mr Fox said: "The surest way to have unhappy service personnel is to have unhappy service families.
"Reducing the number of overseas deployments is a start, but the government must also look at issues of housing, healthcare and veterans' welfare if it wants to avert a serious crisis in recruitment and retention.
"Repairing the broken military covenant is long overdue."
Gen Dannatt said to deal with the issue of over-deployment he would reform the Army's fighting brigades into larger units that could be sent away less often.
This would see the 10 brigades currently comprising around 4,000 soldiers streamlined into six.
In what is being seen as his most outspoken speech since he became Chief of the General Staff in 2006, Gen Dannatt said: "We have seriously stretched our soldiers - both their goodwill and their families.
"A gap of one year between operational deployment is not unusual and often soldiers are spending much of the year before a deployment away from home, in training and preparation. This is unacceptable."
The general, who is to retire this summer, said under-manning in the Army had been exacerbated by the number of troops injured or otherwise unable to deploy.
"The Army should be about 102,000 soldiers. It is currently about 98,500," he said.
"By definition we are under-manned. There is a very strong argument for the size of our land forces to be larger."
Gen Dannatt strongly defended the Army's performance in Iraq against recent criticism and said British forces would be able to leave southern Iraq later this year because their job there was done.
He said Afghanistan was "likely to consume our Armed Forces for the foreseeable future".
He also criticised delays to the Army's next generation of armoured vehicles, saying much of what soldiers travelled in "harks back to the 60s and 70s".