Officials including Afghan President Hamid Karzai have accused NATO-led international forces of killing up to seven civilians, six of them children, in an air strike in the south.
The incident happened late on Wednesday in Zhari district of Kandahar province, a traditional Taliban stronghold where NATO-led International Security Assistance Force (ISAF) troops claim significant progress in recent months.
The Kandahar governor's office said the air strike was aimed against insurgents who were planting mines, but they then fled into a village, where ISAF forces pursued them and struck.
The NATO-led International Security Assistance Force in Kabul acknowledged that the "unfortunate" incident had involved "several civilians being killed and injured" and said it came in response to insurgent action.
It has launched an inquiry into what happened.
The issue of civilian casualties in air strikes is highly sensitive in Afghanistan and has fuelled tensions between Karzai and his Western backers.
Karzai's office issued a statement saying he "strongly condemned" the strike, which it said killed seven people including six children, as well as injuring two young girls.
The president has also tasked a team with investigating the incident.
The governor of Zhari district Niaz Mohammad Sarhadi said that the strike was aimed at Taliban fighters planting roadside mines in the area but missed its target and hit residential areas nearby.
But the governor's office in Kandahar gave a slightly different explanation.
It said that two insurgents had been killed in an air strike, "while the three remaining fled and hid themselves among civilian houses".
It added: "The ISAF aircraft pursued the three remaining insurgents and dropped bombs on a road where they were hiding but as a result, six children were killed and three others were injured."
ISAF commanders say the Taliban and other insurgents frequently hide among the local population in a bid to protect themselves.
However, ISAF forces are supposed to take all possible steps to avoid civilian casualties.
The United States general who commands ISAF troops in Afghanistan, General John Allen, wrote in July that he expected "every member of ISAF to be seized with the intent to eliminate civilian casualties caused by ISAF".
Kandahar police chief General Abdul Raziq said three Taliban had died out of a total death toll of nine, while investigations were continuing to ascertain the identity of the others.
Earlier this month, Afghan elders held a loya jirga or traditional meeting to discuss a strategic partnership deal with the US which will govern Kabul's relations with Washington after 2014.
This is the date by which all foreign combat troops in Afghanistan - currently totalling 140,000, most from the US - are due to leave.
The loya jirga's stipulations for the deal included that Afghan security forces should lead all military operations, the Afghan air force be better trained and equipped and American citizens committing crimes on Afghan soil should not face immunity.