Eight policemen and five Taliban were also wounded in the clash in Kandahar province on Sunday, and three rebels were arrested, a provincial government spokesman said.
The dead Taliban included a provincial-level commander, Mulla Abd al- Baqi, and his deputy Mulla Abd al-Manan, the spokesman said.
Up to 100 rebels are believed to have fled after the battle and are being hunted down by police, he added.
An unknown number of civilians were also wounded in the fighting, which erupted after security forces surrounded a village where the insurgents were hiding.
The fighting started in Kandahar's Panjwayi district after police had gone to the area after tip-offs that Taliban were there.
Panjwayi, about 35km west of Kandahar city, is known to be a hideout for Taliban militants who have been waging a guerrilla-like insurgency against the government of Hamid Karzai for more than four years.
The district borders the province of Helmand which is the scene of regular attacks blamed on Taliban insurgents said to be allied with the al-Qaeda network and opium traders.
Violence has been on the increase in Afghanistan in the past year, raising fears for this country's nascent democracy, and leaving swaths of southern and eastern regions off-limits to aid workers.
The Taliban, a Sunni Islamist nationalist movement, effectively ruled most of Afghanistan from 1996 until November 2001.
They were forced from power by a US-led military assault following the September 11 attacks on New York and Washington.