"It might be the case that, at the end of the day, Assad .. Might get the upper hand," he told a meeting of the Foreign Press Association. "I think that this is possible.
"In such time of conflict, if the opposition is not making any progress, and the regime manages to survive and to get very strong support from other countries, namely Iran and Hezbollah, which is a proxy of Iran, in the end it might just survive," he said.
Israel has repeatedly shied away from involvement in Syria's civil war, insisting it is not backing one side or the other in the conflict which has claimed more than 94,000 lives since March 2011.
But it has recently stepped up its warnings to Damascus over any attempt to draw the Jewish state into a confrontation.
"I would suggest to Syria, to the Assad regime: be very careful not to allow any provocation on the Golan Heights or against the State of Israel," Steinitz said.
Last week, rebel forces briefly seized Quneitra, which lies in the demilitarised zone on the Israel-Syria ceasefire line, prompting fierce clashes with government troops in a development which caused great concern in Israel.
Quneitra is the only crossing point between the Syrian and Israeli zones of control on the Golan Heights.
Israel seized most of the strategic plateau in the Six-Day War of 1967 and annexed it in 1981 in a move never recognised by the international community.
Steinitz said it was crucial that the UN force, which was established to monitor the 1974 ceasefire agreement, be kept in place.
"It is very important to keep the demilitarisation and ceasefire elements of previous agreements between the two sides and we demand that those agreements be fulfilled," he told reporters, saying it was unclear whether the Austrian troops would be replaced.
"It is frustrating that such forces are there when it is quiet but when suddenly there is a real danger of some engagement, they are leaving. I don't blame anybody but this is another proof why we never rest our national security on the presence of international forces," he said.
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