Speaking on NBC's "Today" show, Branson described his friend Fossett as a remarkable individual who touched the lives of those he knew.
Fossett, 63, disappeared Sept. 3 after he took off from a western Nevada ranch in a single-engine plane on a search for suitable sites to attempt a new land-speed record.
"I think the chances are that he's no longer with us," Branson said. "I think everybody involved has pretty well given up hope, sadly."
Branson said Fossett's wife, Peggy, had written to him to say she was returning to Nevada for one final search but the likely fate of her husband was "beginning to sink in."
Fossett had previously survived a nearly 30,000-foot (9,144-meter) plunge in a crippled balloon and a dangerous swim through the frigid English Channel.
Branson paid tribute to Fossett's record-breaking prowess. He said Fossett had set 125 world records since the age of 55
"Incredible individual," Branson said.
Fossett, who made millions as a commodities broker in Chicago, also completed the 1,165-mile (1,875-kilometer) Iditarod sled-dog race, scaled some of the world's best-known peaks, sailed and flew around the world, and set more than 100 aviation and distance records.