Up to 12 Afghan civilians, 10 children and two women, have been killed in a NATO air strike in Shigal district.
A further six women are believed to have been injured in the incident in Shigal district from Kunar province in eastern Afghanistan.
NATO confirmed that “fire support” was used in Shigal after a US civilian adviser died in a militant attack, but said it had no reports of deaths.
Afghan President Hamid Karzai condemned the killings.
A statement issued by Hamid Karzai’s office said the president had already issued a decree banning aerial attacks on civilian areas.
Villagers and local officials said the casualties were inside their homes when they died.
Photographs apparently sent from the scene to international news agencies appeared to show the bodies of several dead young children, surrounded by Afghan villagers.
A local official said eight Taliban insurgents had also died in the air strike on Saturday, which is reported to have caused the roofs of several houses in three villages to collapse.
He said the strikes were called in to support a major operation by US and Afghan government forces targeting senior Taliban commanders and a local weapons cache.
Tribal elder Haji Malika Jan said: “The fighting started yesterday morning [Saturday] and continued for at least seven hours. There were heavy exchanges between both sides.
“The area is very close to the Pakistani border and there are hundreds of local and foreign fighters, mostly Pakistanis, in the area.”
In a statement, the NATO-led International Security Assistant Force (Isaf) said: “We are aware of an incident yesterday in Kunar province in which insurgents engaged an Afghan and coalition force.
“No Isaf personnel were involved on the ground, but Isaf provided fire support from the air, killing several insurgents. We are also aware of reports of several civilians injured from the engagement, but no reports of civilian deaths. Isaf takes all reports of civilian casualties seriously, and we are currently assessing the incident.
“The air support was called in by coalition forces – not Afghans – and was used to engage insurgent forces in areas away from structures, according to our reporting.”
A statement issued on behalf of President Hamid Karzai strongly condemned the NATO attack, and “military operations in residential areas that cause civilian deaths”.
“The president also strongly condemns the Taliban’s tactic of using civilians and their homes as their shields,” it said.
International forces are preparing to withdraw from Afghanistan by the end of 2014. Civilian deaths in Western military operations have been a source of tension between the Afghan government led President Hamid Karzai and the US and its NATO allies.
In February 2012, at least 10 civilians, mostly women and children, were killed in a NATO air strike in the same area.
In February this year, President Hamid Karzai ordered a complete ban on Afghan security forces calling in air strikes in residential areas.