A suicide car bomb, reportedly aimed at a NATO convoy, exploded in a crowded market killing the 21 civilians. The four Canadian troops were killed when militants detonated a roadside bomb and threw grenades at patrols.
Some of the victims of the suicide car bomb were children, Interior Ministry spokesman Yousef Stanezai said, according to wire reports. Thirteen other people were injured in the attack.
In separate incidents in and around Kandahar, Taliban fighters killed four Canadian soldiers, bringing total NATO losses to seven after the organization assumed control of security of southern Afghanistan from U.S. forces on Monday.
Earlier in the week, three British troops were killed when their convoy was ambushed, reported the Associated Press.
Twenty-one Canadian soldiers have been killed in Afghanistan since 2002.
Despite the losses, NATO pledged to continue its mission to bring stability to tumultuous region.
"NATO will stand up to the insurgents and terrorists whose only goal is to wreck the future of Afghanistan," Reuters quoted NATO Secretary-General Jaap de Hoop Scheffer as saying.
"Our military will continue their mission with the full backing of their allies and the international community."
Elsewhere in Afghanistan's southern region, police backed by NATO warplanes killed about 10 suspected Taliban guerillas.
Also on Thursday, but in the northern province of Baghlan, another roadside bomb wounded three civilians, according to the Reuters news service.
Violence in Afghanistan has sharply increased this spring and summer -- especially in the southern regions, where, according to experts, Taliban forces are primarily based. Fighting between Taliban guerillas with Afghan and foreign forces has left more than 900 people, mostly militants, dead since May 2006.
NATO expanded its mission to the south to relieve American forces and assume a more prominent role in the reconstruction of Afghanistan. Many experts say that this mission of one of its most important since its inception 1949 inception.
NATO is preparing to assume the lead security role in all of Afghanistan this fall, absorbing the remaining U.S. troops into its ranks and thereby increasing the size of its force.
The aim is to support the fledgling democratic government by providing a safe environment for free elections, spreading the rule of the law and reconstructing the country.