In an interview on ABC's "This Week" he said progress in the war is seen "in the fact that there's less deterioration as far as the ability of the Taliban to maintain control."
"So we are seeing elements of progress, but this is going to be tough," he added.
The director noted the escalation in Taliban violence that has resulted in a sharp increase in the number of casualties among U.S. and NATO troops this month.
Panetta said the success or failure in Afghanistan will be determined by whether "the Afghans accept responsibility, are able to deploy an effective army and police force to maintain stability."
The CIA head said Osama bin Laden, head of the terror outfit al-Qaida, is in Pakistan's tribal areas but intelligence has not been able to pinpoint his exact location, the ABC report said.
"It's been a while. I think it goes back almost to the early 2000s, you know in terms of actually when (bin Laden) was leaving from Afghanistan to Pakistan that we had the last precise information about where he might be located," Panetta was quoted as saying. "Since then it has been very difficult to get any intelligence on his exact location."
Commenting on the CIA operations against al-Qaida, Panetta said more than half of the terrorist outfit has been taken down, including Shaikh Sa'id al-Masri, the No.3 leader.
"If we keep that pressure on, we think ultimately we can flush out bin Laden and (his chief deputy Ayman al) Zawahiri and get after them," he said.
Panetta said there are currently only about 50 to 100 al-Qaida members remaining in Afghanistan, the report said.
"It's in that vicinity. There's no question that the main location of al-Qaida is in the tribal areas of Pakistan," Panetta said.