The US military said it was investigating the incident which occurred on Sunday, but the US and Nato forces commander in Afghanistan said it was unclear whether the deaths resulted from US military action.
General David McKiernan said US forces came to the aid of Afghans who may have been ambushed by the Taliban.
He said the Taliban beheaded three civilians, possibly to lure in the police.
"We have some other information that leads us to distinctly different conclusions about the cause of the civilian casualties," McKiernan said.
Still, Obama began a meeting with Hamid Karzai, the Afghan president who was in the US for talks on Wednesday, by expressing "great sympathy" and regret for the loss of innocent life, James Jones, Obama's national security adviser, said.
Earlier, Hillary Clinton, the US secretary of state, said in Washington that the Obama administration "deeply, deeply" regrets the loss of innocent life, calling such incidents as the reported killing of the 100 people "particularly painful".
Neither Obama nor Clinton specifically accepted US blame for the deaths.
Karzai, in the US capital for a US-Afghanistan-Pakistan meeting, thanked Clinton for "showing concern and regret" and said he hoped the two sides would work together completely to reduce civilian casualties in the "struggle against terrorism".
'Dozens of bodies'
An International Committee of the Red Cross (ICRC) team in Farah province's Bala Baluk district said it saw "dozens of bodies" at two locations.
"There were bodies, there were graves, and there were people burying bodies when we were there," said Jessica Barry, an ICRC spokesperson.
"We do confirm women and children."
Barry added that an ICRC community-based first aid volunteer and 13 members of his extended family including his five daughters and three sons, were among the dead.
She said that they were killed while sheltering in their home.
The US said on Tuesday that it was conducting a joint inquiry, along with the Afghan government, into the deaths, with investigators from both sides visiting the sites.
Robert Wood, the acting US state department spokesman, said in a statement: "Coalition forces and the Afghan government have received reports of civilian casualties in conjunction with a militant attack on Afghan National Security Forces in Farah Province on May 5.
"A joint investigation will be conducted to determine exactly what happened," he said, and Jones said the investigations would be pursued "aggressively".
Colonel Greg Julian, a US military spokesman in Afghanistan, acknowledged that a battle had taken place, but could not say if there had been civilian deaths.
"Once we get eyes on the ground we will have a better idea of what may have happened," he said.
Account of clash
The deadly clashes in Bala Baluk occurred after Taliban fighters killed three former government officials in a village for co-operating with the state, Amin, the Farah governor, said.
|If verified, the deaths would be the single biggest loss of civilian life since 2001 [AFP]
He said that villagers had brought lorryloads of bodies to his office in the provincial capital as proof of their death.
The US government has come under increasing criticism during the past year for civilian deaths during operations against Taliban and al-Qaeda fighters in Afghanistan.
Barry, the ICRC spokesperson, said: "I think that it is important to remember that this is not a one-off situation. There has been a rise in casualties over the last year.
"It is absolutely important to remind all sides that civilians must not be harmed."
For his part, Wood of the state department said: "US and international forces take extensive precautions to avoid loss of life among Afghan civilians as well as international and Afghan forces during operations against insurgents and terrorists."
Karzai had earlier said that the civilian deaths in Farah were unacceptable and that he intended to discuss it with Obama.
The trilateral talks on Wednesday involving Karzai, Obama and Asif Ali Zardari, the Pakistan president, were aimed at addressing the war against the Taliban.
Focus on fighting
The Taliban has used Pakistan's border region with Afghanistan as a base to launch attacks in the two countries since their five-year rule in Kabul was ended by a US military invasion in 2001.
Washington has heightened its focus on fighting the Taliban since the Obama administration assumed power this year, with an added 21,000 troops being sent to Afghanistan.
There are more than 30,000 US troops in Afghanistan already, alongside a similar number of troops from other foreign nations.
Last year, more than 2,000 civilians were killed in fighting against the Taliban, according to the UN, a 40 per cent jump from the previous year's figure.