Governor of Kandahar, Yusuf Pashtun, reportedly sacked the district governor Haji Agha Lalay on Sunday.
Pashtun based his decision on claims that Lalay had been co-operating with the Taliban.
But lalay called a meeting of the Loya Jirga or grand assembly, which resulted in a strong statement from the tribal leaders denouncing the decision and vowing to ignore Pashtun's decision.
Leaders from the Loya Jirga said neither Pashtun or President Hamid Karzai could sack a district governor. They added that the constitution did not allow individual politicians to remove the district governor.
Meanwhile, President Hamid Karzai has publicly stated that he would like to work with so-called 'moderate' members of the Taliban to rebuild the war torn nation.
More US losses
The political turmoil comes as US forces continue to sustain losses with suspected Taliban and Afghan fighters.
One US marine was killed and another injured on Saturday after a fire-fight with suspected Taliban
About 2700 marines have been
deployed to Afghanistan recently
US troops came under attack overnight near Tirin Kot, the capital of the southern province of Uruzgan, Colonel Tucker Mansager told reporters.
Uruzgan, where two Marines were injured last week, is considered a stronghold of the ousted Taliban. It is also the home province of the Taliban's fugitive leader Mullah Muhammad Umar.
About 2700 marines with the 22nd Marine Expeditionary Unit were deployed to Afghanistan in April to bolster the US-led force's campaign against the Taliban and suspected al-Qaida fighters engaged in a drawn-out guerrilla war-fare.
The Marines, whose deployment swells the 15,000-strong coalition force to its largest level since operations began in late 2001, set up a new base last week just outside Tirin Kot.
The death, which brought to 112 the number of US-led soldiers killed in Afghanistan since late 2001 in combat and accidents, comes as the country struggles with security before landmark elections in September.
US Secretary of State Colin Powell said in an interview with AFP on Friday he was confident the elections, already postponed from June, would go ahead despite slow voter registration and security problems.