Prime Minister Gordon Brown has told MPs that forces are "winning the battle against the insurgency" in Afghanistan.
Britain may have to fight the Taleban for years to come
He said Britain and its coalition partners were "isolating and eliminating the leadership of the Taleban, not negotiating with them".
But he backed Afghan leaders' moves towards "political reconciliation" with ex-insurgents who renounce violence.
The current level of 7,800 troops would be maintained, said Mr Brown, as part of the UK's "long-term commitment".
He also announced £450m development funding and more equipment for troops.
He said British, Afghan and Nato forces had been "driving the insurgents and extremists out of their hiding places" and stopping them regrouping and attacking "areas around the provincial capitals".
He said he wanted to build on military progress and help Afghans take more responsibility for government, security and economic development.
Newspaper reports had suggested that Mr Brown would say it was "time to talk" to the Taleban.
But outlining his strategy in the House of Commons, the prime minister said: "Our aim is to isolate and eradicate the Taleban insurgency and to isolate the leadership. We are not negotiating with the leadership and we don't propose to do so."
He wanted to support Afghanistan's president Hamid Karzai in his efforts towards "political reconciliation" which had already seen 5,000 fighters lay down their arms, he said.
Mr Brown also paid tribute to the courage of military personnel doing "vital work" in "dangerous places", and said the current 7,800-strong British force in Afghanistan would be maintained.
And he announced £450m for "development and stabilisation assistance" between 2009 and 2012, as well as 150 new protected patrol vehicles and extra Sea King helicopters.
He said the aim was for an extra 20,000 Afghan soldiers to be trained up next year, bringing the total to 70,000 and promised more police trainers to tackle "decades of failure and corruption" in building up police, courts and prisons.
He urged President Karzai to press ahead with "targeted eradication" policies against the poppy crop in Helmand.
And he urged more troop contributions from other Nato countries, along with the appointment of a "strong UN envoy" to co-ordinate international security, governance and development programmes.
Conservative leader David Cameron welcomed the announcements about equipment and said his party had long called for a single international figure to co-ordinate aid and reconstruction in Afghanistan - as Lord Ashdown had done in Bosnia.
He also asked Mr Brown to give quarterly updates on Afghanistan. He said: "This country is giving a tremendous amount to Afghanistan in both aid and lives.
"Those of us on this side of the House believe it is a worthwhile effort but the country wants reassurance."
The Liberal Democrats' acting leader Vincent Cable said recent surveys had suggested increasing concern among the British people and that a majority were in favour of withdrawal.
"There is a consensus among the parties in here that we continue to support the Afghan assault," he said.
"But what are you going to do to persuade British public opinion that this activity is necessary and right?"
Earlier politicians paid tribute to Sgt Lee Johnson, 33, who was serving with the 2nd Battalion The Yorkshire Regiment when he was killed in an explosion during the assault on Musa Qala, which had fallen to the Taleban.
The number of UK troops killed on operations in Afghanistan since 2001 now stands at 86.