Chief of the General Staff General Sir Peter Wall said government cuts would need to be reversed if ministers wanted to send UK troops into battle as early as nine years from now.
He was speaking to hundreds of military leaders and defence industry experts at the Royal United Services Institute in Whitehall, London, who had gathered for the think tank's annual land warfare conference, "Future Force 2020".
Gen Wall said: "The nation has made it very clear - the government has - that there's a strategic goal to restore economic balance, within which defence must play its part.
"Strong defence does rely on a strong economy, and so we face a budget that is reducing considerably over the early years of the coming decade, after which we will certainly require a real-terms growth in the latter part of the decade if we are to resource 'Future Force 2020'."
He said current army equipment was specific to Operation Herrick in Afghanistan and would need updating or replacing before new military campaigns were launched.
Ministry of Defence spending projects have been heavily criticised in recent months by government spending watchdog the National Audit Office.
Gen Wall said: "The army has an excellent suite of equipment at the moment, but it is specific to the Afghan challenge.
"If we look at our core equipment programme, it's rather a different story.
"This programme has tended to be a budget regulator for the whole of defence, as witnessed by comments in the recent National Audit Office report on the procurement of armoured systems.
"This is something we have to address aggressively and innovatively in the next year or two if we are to have an equipment programme to be proud of in the 2020s."
Gen Wall said expensive wars waged in Afghanistan in 2001 and Iraq in 2003 had paved the way for spending cuts announced in October's strategic defence and security review.
He went on: "In a period of economic stringency, there is a natural tendency to want to reduce uncertainty and particularly so on the back of what some have seen as the awkward experiences of enduring campaigns in Iraq and Afghanistan, especially when those two were overlapping with the inevitable constraints on resources."
He also said winning the war in Afghanistan was beyond Britain's control.
Efforts to defeat the Taleban insurgency would fail without a political solution, which was up to Afghans, he said.
"Key to terminating any insurgency is going to be the form of political resolution, something over which we as a nation - and certainly we as an Army - do not have direct control," the general said.
"This is very much an issue for Afghan people, Afghan politicians and those in the region."