Alasdair Hay told MSPs that it was an “anxious time for staff” and that Scotland would lose some of its 4,000 full-time and 3,000 retained firefighter posts.
Mr Hay said there will be no compulsory redundancies but that money saved through expected retirements will “go nowhere near” meeting the funding gap.
Public spending watchdog Audit Scotland identified the £42.7m funding gap, the equivalent of more than 1,000 firefighters, but Mr Hay said he intends to meet some of the shortfall by efficiency savings.
The number of firefighters has already been cut from about 4,000 to 3,850 since the Scottish Fire and Rescue Service (SFRS) was controversially created by the merger of eight regional services by the Scottish Government in 2013.
Mr Hay, speaking at Holyrood’s public audit committee, said that savings identified by Audit Scotland would not meet the funding gap and that more job cuts would be needed.
He said: “It is about a reduction in the number of people that work in the organisation, identified within the report as 79 per cent of our budget that is based on staff costs. To take that much out of the budget, you would have to reduce headcount in the organisation.”
He added: “I am always extremely reluctant to reduce the number of firefighters. However, we do not have a fixed number of firefighters in Scotland.
“We had approximately 4,000 whole-time firefighters before we came into the single service. As we stand today, we have got approximately 3,850 whole-time firefighters.
“So, we have reduced them, but if we were to take the amount of money out of the budget that has potentially been indicated within this report, you would have to look at a reduction in whole-time firefighters across Scotland.
“Clearly, as you go through a reform process, it is an anxious time for staff.”
However, Fire Brigades Union (FBU) Scottish secretary Stephen Thomson, called for an “immediate moratorium” on jobs cuts in the service.
He said: “Being a firefighter is an inherently dangerous job and we believe that having fewer firefighters in Scotland would increase the dangers to those on the frontline and put public safety at risk.
“We were told that a single service would protect the front line, but the cuts keep coming.”
He added: “We’re calling for an immediate moratorium on further cuts.”
Scotland’s community safety minister Paul Wheelhouse has previously said that since the launch of the SFRS, not a single fire station has been closed by the management.