Four policemen were also killed in the battle in Panjwai district, to the southwest of Kandahar city, Neyaz Mohammad Sarhadi, the local police chief, said on Sunday.
"So far, we've recovered the bodies of 72 Taliban," Sarhadi said.
The battle started late on Saturday after hundreds of Taliban attacked the district government headquarters, he said.
Nato aircraft were also involved in the fighting in the district where clashes have broken out regularly since May when hundreds of Taliban were found to have infiltrated the area.
"It was fierce fighting and lasted until early this morning," Sarhadi said.
Major Scott Lundy, a spokesman for Nato troops, said the Taliban had suffered significant casualties. He said the Nato force had not suffered any losses.
The Taliban could not be reached for comment; but the guerrillas have in the past rejected death tolls issued by Afghan and foreign forces.
Afghanistan is going through its worst phase of violence since US-led troops overthrew a Taliban government in 2001.
More than 1,800 people have been killed in violence this year, most of them militants but including more than 90 foreign troops.
Four foreign soldiers were killed in two separate clashes on Saturday.
In a separate incident on Sunday, a British soldier was killed in southern Afghanistan, according to the ministry of defence.
"He died as a result of a contact on Sangin, northern Helmand province," a ministry spokesman told Reuters in London.
Three other British soldiers were wounded in the incident.
Most of the violence has been concentrated in the south where Nato assumed responsibility for security from a separate US-led force last month.