Liam Fox has said he is "cautiously optimistic" about the progress that UK troops are making in Afghanistan.
The defence secretary told MPs that levels of violence had fallen in some areas and recruitment of Afghan army and police officers was on target.
Some of the 10,000 UK personnel could come home this year if "conditions on the ground" were suitable, he added.
But he warned casualties could increase in the future and he was "concerned" about levels of corruption in Kabul.
The government has said it wants UK combat troops to leave Afghanistan by 2015.
'Taking the fight'
In his quarterly update to Parliament on the UK's mission - part of the Nato-led International Security Assistance Force - Dr Fox said the challenge was to have the "patience and will to see it through".
The deaths of two personnel on Monday - following a fire at the Camp Bastion base - were a reminder of the daily sacrifices the country's armed forces were making but he insisted the mission continued to be vital to protecting UK national security.
Dr Fox said there were some encouraging signs of progress in Helmand Province - the region of southern Afghanistan where the bulk of British troops are stationed.
While troops were "taking the fight" to insurgents, the number of "security incidents" in certain areas had fallen from as many as 25 a day to just a handful.
"It is fragile and not irreversible but it is progress," he said.
But he warned that "2011 will be just as difficult as 2010" and the number of British casualties was set to rise as the weather improved and insurgent numbers rose after the winter.
While the Afghan government was on track to meet an October target for recruitment of new army and police officers, he said reports of corruption at Kabul Bank - the country's largest private bank - and in other institutions continued to be of real concern.
Shadow defence secretary Jim Murphy said Labour continued to support the government's policy in Afghanistan but former foreign secretary David Miliband expressed concern about levels of violence and a lack of headway in getting regional backing for improved security and governance.