A Taliban official in Musa Qala denied that any of its fighters had been killed in the town and said foreign forces had bombed civilians from the air.
The battle near Musa Qala in Helmand province, the world's largest poppy growing region, is at least the fifth major fight in the area since September 1.
The Taliban over-ran Musa Qala in February, four months after British troops left the town after a peace agreement that handed over security responsibilities to Afghan elders.
Musa Qala has been in control of Taliban fighters ever since.
Situated in the north of Helmand, Musa Qala and the region around it have been the front line of the most severe fighting this year.
It is also the heartland of Afghanistan's illicit poppy farms.
Violence in Afghanistan this year has been the deadliest since the 2001 US-led invasion.
More than 5,200 people have died this year due to the violence, according to an Associated Press count based on figures from Afghan and Western officials.