Defence Secretary Des Browne has said UK-led Nato forces are facing "problems" in Afghanistan but there was no question of troops being pulled out.
More than 3,000 UK troops are now in Afghanistan
He warned it would be a "potential nightmare" for the west if Afghanistan was allowed to become a terrorist "training ground" as it was before.
Mr Browne was responding to a report by a committee of MPs which called on Nato countries to commit more troops.
It highlighted equipment shortages and fears the Taleban are gaining strength.
But its main focus was troop numbers, with MPs saying they were "deeply concerned" that some member countries were reluctant to contribute troops.
The Commons defence committee said the International Security Assistance Force (Isaf) was still two battalions short of the requirement set by Nato commanders.
The government agreed that challenges in Afghanistan were "considerably greater" than some admitted.
Other problems identified in the wide-ranging report include a lack of training for Afghan police and an unclear policy on eradicating the country's opium poppy fields.
Britain, which leads NATO forces in the Helmand province in the southern Afghanistan, is one of the largest contributors to the Isaf mission, with 7,100 troops.
In its report, the committee said some Nato members were continuing to impose restrictions on where their troops could operate.
Isaf currently has almost 37,000 troops in Afghanistan, but a far larger force - backed by increased development aid - was needed to stabilise the country, it added.
The report said: "We remain deeply concerned that the reluctance of some Nato members to provide troops for the Isaf mission is undermining Nato's credibility and also Isaf operations."
James Arbuthnot, the committee's chairman, said Nato countries all had their own national reasons for not giving the same levels of commitment.
He added: "The fear that we have as a result of this is that this deployment itself is at risk of failing, and if this deployment fails then Nato's existence is under threat."
The committee also warned that Nato appeared to be falling behind the Taleban in the "information campaign".
It warned that "exaggerated" claims of enemy casualties risked handing a propaganda weapon to insurgents.
Meanwhile, civilian casualties caused by Isaf were undermining support for the Nato mission and the Afghan government of President Hamid Karzai and fuelling the insurgency.
The committee said that, while progress had been made in training units of the Afghan National Army working with Isaf, they were still "some way off operating independently".
The report said British forces still needed more helicopters and that the level of helicopter operations was "not sustainable at the present intensity".
Defence Secretary Des Browne welcomed what he described as a balanced report, adding in a statement that he agreed with its assessment "that Nato nations should do more to meet the shortfalls in requirements".
He told BBC Radio 4's Today programme: "This report has many positive elements in it.
"There are significant challenges; this is a complex environment. There are 37 countries with troops in this country and there are many billions of pounds of aid.
"Quite specifically this report says that the ISAF mission is bringing tangible improvements to the people of Afghanistan."
Shadow defence secretary Liam Fox said the report was "a severe indictment of the government's handling of the situation in Afghanistan".
Liberal Democrat defence spokesman Nick Harvey said: "This is an operation that Nato can ill-afford to lose and yet co-ordination between international actors remains poor."
LEAD INTERNATIONAL FORCES IN AFGHANISTAN
Locations refer to International Security Assistance Force (ISAF)
Total contributing nations: 37
ISAF total strength: Approx 35,500