Assad's forces are now able to keep the rebels in check, although victory remains elusive, according to a report by the service chief Gerhard Schindler, news site Spiegel Online reported.
The assessment is a reversal from last year when the service, the Bundesnachrichtendienst (BND), pointed at a wave of desertions by regime troops and predicted the regime's fall by early 2013.
Schindler reportedly told top German security officials in the secret briefing that in recent months Assad's forces had rebuilt supply lines for weapons and for fuel for tanks and airforce jets.
On current trends, Syrian forces backed by Lebanon's Hezbollah militia could, after recent advances in Damascus, secure the entire south of Syria by the end of the year, he reportedly said.
Schindler also said that there was no clear chain of command between the Syrian opposition abroad and the rebel fighters on the ground, complicating the outlook for peace talks.