Four Afghan soldiers and a policeman were also killed along with the 60 suspected Taliban in a major clash near Tirin Kot, the capital of the southern Uruzgan province on Wednesday.
General Rahmatullah Raufi, who commands Afghan forces in the south, said: "We launched a massive search and clean-up operation after the attack in which our troops spotted and killed 60 Taliban."
The continuing violence comes as the US military defended an airstrike that began on Sunday.
The US-led coalition said it used "precision fire" from aircraft cannon and not bombs during an operation directed at Taliban fighters that Afghan officials said killed at least 16 civilians.
A US spokesman, Tom Collins, said the troops had the right to return fire during the raid, after insurgents occupied the homes of villagers.
"We didn't know there were civilians in the houses," he said.
On Monday, villagers from the Panjwayi district of Kandahar province said that their homes had been bombed and that the number of civilian dead was more than 16.
This claim was backed up by the country's main human rights group, the Afghanistan Independent Human Rights Commission.
A spokeswoman said the group were unable to send representatives to the site due to security concerns, but the group's investigations and witness accounts confirmed that at least 20 had died.
"They prey upon people who don't have a lot of hope. These people may not believe much in the cause, but they need a job"
Tom Collins, US military spokesman
The attack prompted the Afghan president, Hamid Karzai, to summon Lieutenant General Karl Eikenberry, commander of the 20,000-strong coalition force, to demand an explanation for the death of civilians.
Collins said the engagement started with a coalition strike on a "column of Taliban" that was on a long and open road.
"We know for a fact that there were no non-combatants in that area when we struck that column," he said.
"At this point the Taliban entered some buildings within approximately a couple of hundred metres from where the strike went in. They started to deliver concentrated machinegun and rocket-propelled grenade fire on our forces."
Collins also said Taliban rebels have grown in "strength and influence" recently and have a hard core of fighters in the south of the country.
He said that Tliban are recruiting poor villagers.
"They prey upon people who don't have a lot of hope. These people may not believe much in the cause, but they need a job," he said.
British plane catches fire
Elsewhere on Wednesday, a British military plane carrying the country's ambassador caught fire when landing.
Flames engulfed the wheels of the British C-130 Hercules just after it touched down in Lashkar Gah, the capital of Helmand province, but all the passengers escaped safely.