In separate fighting, 10 Taliban members and a policeman also died, officials said.
A Taliban spokesperson was not immediately available to comment on the casualty figures and the toll could not be independently verified.
Fighting began on Wednesday night after the Taliban attacked a joint US-led and Afghan National Army patrol.
"During the course of the battle, the insurgents attacked from 16 separate compounds using heavy machineguns, rocket-propelled grenades and small-arms weapons," said the US-led coalition's statement.
The troops called in air support, and coalition planes dropped two bombs on buildings which were deemed to contain the most insurgents. Secondary blasts suggested there was a cache of explosives inside, the statement said.
During the battle, the Taliban sent reinforcements using a system of wadis, or riverbeds, linking the area of the fighting to the nearby district of Musa Qala, it said.
In neighbouring Kandahar, the province where the Taliban first rose to power in the 1990s, fighters attacked a police post in the Maruf district overnight, Sayed Aqa Saqib, the provincial police chief said.
"Ten Taliban bodies were left on the battlefield and four were wounded. An Afghan policeman was also martyred and eight were hurt," he said.
In a separate incident at about the same time, fighters attacked security forces in Kandahar's Khakraiz district, leaving three policemen wounded and causing an unknown number of Taliban casualties, Saqib said.
Meanwhile, David Miliband, the British foreign secretary, who made his first visit to the country in his new role on Wednesday, said success in establishing democracy in Afghanistan will help in the fight against extremism around the world.
Miliband said the UK's 7,000-strong presence as part of a Nato force in Afghanistan was essential because Afghanistan was "unique" and "it matters to Britain".
|Miliband has said fighting extremism in |
Afghanistan would have a global affect [AFP]
Miliband said that not intervening in Afghanistan would be more costly in the long-run.
He is now in Pakistan for talks with Pervez Musharraf, the Pakistani president, on combating al-Qaeda and Taliban fighters along the Afghan frontier.