Air Chief Marshal Angus Houston, head of the Australian military, told parliamentary committee hearings in Canberra that the military came near to its deployment limit in 2006.
When East Timor asked in May 2006 for help with an outbreak of civil violence, Australia sent 3,200 defense personnel to the island.
Houston told the committee that that was a "substantial deployment" for Australia.
"At that stage I think, if memory serves me correctly, 1,400 people in Iraq, about 500 in Afghanistan and a number of people on other smaller operations, we topped out with 5,200 people deployed on operations in late June of 2006," he said.
"So I would put it to you that if we were to deploy a large force into Afghanistan we would be taking a risk in terms of looking after our regional responsibilities."
The issue of Australia sending more troops to Afghanistan arose because of speculation that Australia would take over the lead role in Oruzgan province when the Dutch leave in August.
The Dutch have been the lead country in southern operations since sending 1,600 troops there in 2006. More than 20 Dutch soldiers have been killed in Afghanistan.
Dutch Prime Minister Jan Peter Balkenende restated last weekend his coalition government's commitment to exit Afghanistan in August. The departure date was set in February, a day after the coalition government fell apart when the two largest parties couldn't agree to a planned withdrawal of troops.
The largest party, Balkenende's Christian Democrats Alliance, wanted to agree to a NATO request to keep soldiers in Afghanistan beyond 2010, while the Labor Party, the government's second largest party, opposed the plan.
Dutch troops were meant to have pulled out in 2008 but their deployment was extended by two years since no other NATO member state offered replacements.
The Dutch parliament voted in October that the deployment must end by August 2010.
It is widely believed that that U.S. troops will take over.
Australia's Defense Minister John Faulkner told the parliamentary committee that Australia hasn't been formally asked to fill the role of the Dutch.
Faulkner agreed with Houston that Australia must be careful not to erode its military capability closer to home.
"Our contribution, which as you know was enhanced a year ago to around 1,550 personnel, is a very significant contribution given the size of our Australian Defense Force," said Faulkner.
"The first thing I think you should take account of is the responsibilities we have in our region."
However, the Australian contingent will increase increase its training role in Afghanistan, Houston told the committee. It will take over training of all the 4th Brigade of the Afghan National Army.
More than 700 Australian troops have been mentoring two of the six kandaks, equivalent to battalions, from the 4th Brigade.
Houston said by the end of the year Australia will be training all six kandaks, which likely will be involved in offensives against insurgents in Kandahar province.
''I am pleased to say that there is growing evidence that our kandaks are maturing toward their end-state of independent operations and the Afghan soldiers themselves have shown considerable resilience under fire, and in facing the threat of improvised explosive devices,'' Houston said.
He also predicted a major turnaround in Afghanistan if the coalition forces can prevail in Kandahar province, the heart of the Taliban insurgency.
Houston praised the town hall-style meetings conducted alongside military operations as part of a more people-centric strategy by U.S. President Barack Obama.