NATO, however, contended that a preliminary review showed 12 civilian deaths.
The incident occurred during the Eid al-Fitr festival, marking the end of the Muslim month-long holiday of Ramadan.
A NATO spokesman on Wednesday announced that the bombing campaign had yielded the deaths of 48 Taliban guerilla fighters during three separate clashes in the Panjwayi district, located just outside the provincial capital of Kandahar city, where the Taliban formed in the 1990s.
Last month, in the same district of Panjwayi, NATO said that it had killed as many as 500 Taliban fighters.
The NATO-led International Assistance Force in Afghanistan, or ISAF, "has received credible reports that there were a number of civilian casualties including women and children arising from one or more of these incidents," a NATO spokesman said, according to Reuters.
Afghan Interior Ministry spokesman Zmarai Bashiry told the BBC that local police and officials had confirmed more than 40 villagers were killed in the NATO raids.
During a press conference, NATO spokesman Mark Laity said that Taliban insurgents frequently use locals as human shields, and that alliance forces tried to minimize the number of civilian deaths during the raid.
A spokesman for the ISAF, Major Luke Knittig, was unable to confirm the high death tolls, reported the BBC. But he told reporters in Kabul: "Very sadly, civilians continue to get caught up in these engagements with tragic results."
A statement from the Taliban said that they suffered no deaths and only civilians were killed.
Reports from southern Afghanistan tell of civilians pulling family members out of the rubble from collapsed homes.
The Afghan Defense Ministry has sent a team to investigate. Also, President Hamid Karzai on Thursday appointed a team of local elders in the area to look at the case, Reuters reported.
This year has been particularly turbulent in Afghanistan. More than 3,000 people have been killed, most of whom have been insurgents, but civilians have also felt the effects.
Ever since the United States ousted the Taliban regime from power in 2001, the Islamic fundamentalist group has waged insurgent attacks. This year's attacks have been especially aggressive.
NATO, which assumed control of the security forces last summer, has assumed the lead role in confronting Taliban rebels.
In 2003, NATO took over command and coordination of the ISAF, "a coalition of the willing deployed under the authority of the U.N. Security Council", to support the fledgling new government in Afghanistan by providing a safe environment for free elections, spreading the rule of the law and reconstructing the country, according the NATO.
Initially, the ISAF was assigned to secure just the capital Kabul, but gradually NATO forces expanded operations to other parts of the country, including the more peaceful western and northern provinces. Now, NATO has stretched southward and expanded its forces.
NATO is employing an "ink-spot" strategy of establishing zones of security in which locals can live and work freely.