This statement is made by Frederic Henry while talking with the young priest. To understand it, Frederic's words must be considered in the context of their conversation. In Book III, Frederic has returned to his unit after having been wounded on the front lines of the war. He and the priest discuss the future of the war. The priest believes that it will end soon because its terrible effects are now being felt by everyone; he believes both sides simply will stop fighting.
Frederic disagrees. He contends that the Austrians will not disengage because they have won the most recent battle. Frederic tells the priest, "No one ever stopped when they were winning." He continues:
I only think the Austrians will not stop when they have won a victory. It is in defeat that we become Christian.
When the priest responds that the Austrians, except for Bosnians, are Christians, Frederic draws a distinction between being "technically Christian" and being "like Our Lord." He separates religion from the person of Jesus. "We are all gentler now because we are beaten," Frederic says, which suggests that he is speaking of humility and that he has said "like Our Lord" as an example of being humble. Frederic believes that humility is born of defeat, not victory. He goes so far as to tell the priest that had Peter rescued Jesus before his crucifixion, Jesus would have been different.
Finally, Frederic says these words to the priest:
Something may happen [to bring the war to an end] . . . But it will happen only to us. If they felt the way we do, it would be all right. But they have beaten us. They feel another way.
The Austrians, Frederic believes, will not stop fighting because they have not been humbled by defeat.
He suggests that humility is born of defeat, not victory.