One wounded man at the main Uruzgan hospital told the Associated Press that 18 members of his family had been killed.
The casualties come amid rising anger in Afghanistan over civilian deaths caused by foreign troops.
On Sunday, seven Afghan were killed during a US-led multinational-force air strike against a suspected al-Qaeda safehouse in eastern Afghanistan that also left several fighters dead.
|Timo Smeehuijzen, a Dutch soldier, became one|
of the latest Nato casualties this week [AFP]
The White House described the incident as a "tragedy" but also accused the fighters of using human shields.
The UN said it sent a team to investigate the incident in the Zarghun Shah district of Paktika province, about 180km south of Kabul.
Foreign troops have killed more than 120 civilians in Afghanistan in recent months, reports say.
The deaths have sparked street protests calling for resignation of Hamid Karzai, the president, and the withdrawal of US troops from Afghanistan.
US forces make up the bulk of the more than 50,000 foreign troops operating in the country.
Faced with an increase in Taliban attacks, growing frustration over corruption and lack of economic development, Karzai has warned that civilian deaths would have dangerous consequences for his government and the troops.
Nearly 6,000 people have been killed in Afghanistan over the past 17 months. About 1,500 of them have been civilians.