Civilian casualties caused by NATO-led troops have been one of the most contentious issues in the campaign against Taliban insurgents, fueling public anger and often triggering criticism from President Hamid Karzai.

The two children, aged seven and eight, were killed on Thursday morning as Australian soldiers fought back after a Taliban attack in southern Uruzgan province, said provincial governor Amir Mohammad Akhundzada.

"The children were killed by Australian troops, it was a mistaken incident, not a deliberate one," Akhundzada told AFP, adding that insurgents had first shot at a helicopter carrying Australian soldiers.

NATO commander, US General Joseph Dunford, issued a statement later accepting responsibility and offering an apology.

"I offer my personal apology and condolences to the family of the boys who were killed," Dunford said in a statement, according to Reuters. "The boys were killed when Coalition forces fired at what they thought were insurgent forces."

The boys' deaths come after 10 Afghan civilians, including five children, were killed by a NATO airstrike in Kunar province two weeks earlier.

Following the attack, Karzai barred Afghan forces from seeking air support from foreign troops in a bid to curb civilian casualties.

Security responsibility for Uruzgan, a restive province where the Taliban insurgents have been holding sway, is being handed over to Afghan forces.

The bulk of Australia's 1,550 troops are based in the province, and are focused on training and mentoring Afghan soldiers ahead of the withdrawal of NATO combat troops by the end of next year.

NATO and Afghan officials met with village leaders after the shooting to discuss the incident, BBC reported.

"I am committed to ensuring we do the right thing for the families of those we harmed, as well as for the community in which they lived," Dunford's statement also said, according to BBC.

GlobalPost writer David Trifunov contributed to this report.

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