The battle broke out on Tuesday when soldiers from the US-led coalition went to the village in southeastern Paktika province in search of Raz Muhammad, who the military said was implicated in attacks against its troops.
"Coalition troops were fired on by Raz Muhammad and other Taliban forces when they attempted to capture Muhammad," the military said in a statement released on Thursday.
"During the ensuing fire-fight, Muhammad and two other enemy insurgents were killed. An Afghan woman and two children also died."
An Afghan helping the coalition troops also was killed, it said. It was unclear if he was a member of the Afghan security forces or an informer.
Another child and a second Afghan working with the coalition were wounded, the statement said. The child was reported in stable condition.
Mullah Hakim Latifi, a purported Taliban spokesman, said the clash occurred on Wednesday afternoon when US troops surrounded the tents where Muhammad was living in Waza Khwa, an impoverished district on the Pakistani border.
"Muhammad resisted the US forces," Latifi told The Associated Press by satellite telephone from an undisclosed location.
He confirmed the death of Muhammad, who he said was a senior military commander in eastern Laghman province before the Taliban's ouster in 2001 and said his wife and six of his children were also killed.
Latifi claimed that eight American soldiers had perished in the battle, but the US military said none of its soldiers were hurt.
Karzai has been unable to tame
an insurgency in Afghanistan
Paktika lies in a swath of Afghan territory along the mountainous Pakistani frontier where a stubborn insurgency has exposed the feeble reach of the government of US-backed President Hamid Karzai and hampered reconstruction.
Taliban leaders have threatened a fresh offensive as the harsh Afghan winter wanes, but commanders of the 18,000 overwhelmingly American combat troops in Afghanistan and the separate 8500-strong Nato security force insist the rebels are weakening.
News of the Paktika clash came a day after the US military said its aircraft killed five suspected Taliban fighters near the border in Khost province and also that US-led troops had shot an Afghan boy during a search operation.
The boy died on Wednesday when troops fired towards a suspected bomb-builder and two armed men in a village near Asadabad in eastern Kunar province, the military said.
Afghan leaders have complained repeatedly that US forces use excessive force during search operations and fail to consult with local authorities.
UN and human-rights officials have warned that civilian deaths are playing into the rebels' hands.