"We expected a greater offensive this year than took place," Panetta said in an interview with PBS' Charlie Rose. "And I think in large measure the reason it didn't take place is ... we have reduced the influence of the Taliban, and as a result have given Afghanistan back to the (Afghans)," the Defense Department reported on its Web site.
As for Afghan security forces, Panetta said: "They're going out with our troops. They're putting themselves on the line. They're in battle, and they're doing a good job.
"So I'm feeling much better about the situation in terms of ... being able to turn more of this over to them."
He said the program to hand over security of Afghan regions to Afghan forces has gone well so far and that by 2014, the Afghan people should be "well on the path" to securing and governing their nation for the future.
On reconciliation between Afghan leaders and Taliban members, Panetta said the program requires the insurgents to give up their arms, to become a part of their government, and to renounce al-Qaida.
He said both the United States and Pakistan should also be a part of that process, noting Pakistan is critical to regional security.
The secretary said he has "made very clear" to both Gen. Ahmad Shuja Pasha, director general of Pakistan's Inter-Services Intelligence agency, and Pakistani army chief, Gen. Ashfaq Parvez Kayani that terrorism is a threat to both Pakistan and the United States.
"If you're against terrorism, you have to be against all forms of terrorism," Panetta said. "You can't just pick and choose among them."
Panetta said he had made clear to the two that al-Qaida has a large presence in their country's federally administered tribal areas, and that the United States "will go after al-Qaida in the (tribal areas) so that they never have the opportunity to attack (the United States) again."