The Pentagon has said the operation was prompted by "credible intelligence" that the "principal al-Qaeda leadership" in east Africa was in the area that was hit by an AC-130 gunship on Monday.
Sheikh Abdullahi Ali Malabon, an elder in the Afmadow area, one of several hit during air attacks this week, said 100 bodies had been counted.
"We have sent a team to assess the casualties there and they have confirmed more than 100 people killed," he told the AFP news agency by telephone from the remote area. "Many others were wounded, but we don't have an exact number."
The US official said it was "possible" the civilian casualties that have been reported resulted from aerial attacks launched by Ethiopian forces that helped Somalia's transitional government defeat the Union of Islamic Courts.
Somali and Ethiopian forces skirmished with Islamic courts fighters in southern Somalia on Thursday, setting off a brush fire, residents told the Associated Press by two-way radio.
The fighting comes after Meles Zenawi, the Ethiopian interim prime minister, said his forces were carrying out "mop-up operations" against Islamic courts fighters in the extreme southern corner of Somalia and that he expected to withdraw his troops within a few weeks.
The remote, forested area has few residents and high-frequency radio is the only reliable form of communications.
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One resident, asking not to be named for fear of retribution, said: "We are hearing bombardment in Ras Kamboni. It started around 6am and the strike is now continuing. We can't see planes, but we can hear heavy explosions."
Mosa Aden Hersi, who lives 25km from Ras Kamboni, said earlier fighting in the area had triggered a brush fire. At least 35 civilians were killed along with fighters during the battle.
"We saw the dead bodies of 17 men in military uniform under a small hill, but we do not know their identity."
In Washington, officials said US special operations forces are in Somalia hunting suspected al-Qaeda fighters, but Pentagon officials dismissed the idea that they are planning to send any large number of ground troops to the African nation.
US and Somali officials said on Wednesday that a small American team has been providing military advice to Ethiopian and Somali forces on the ground. The officials provided little detail and spoke on condition of anonymity.