Australian troops in southern Afghanistan are on alert after three fellow soldiers were shot dead and seven wounded by a gunman wearing an Afghan army uniform.

An Afghan interpreter was also killed in the incident, which happened during a routine morning parade at Shah Wali Kot in the southern province of Kandahar.

The attacker was shot dead moments later when troops returned fire.

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The Australian soldiers wounded have been taken to a medical facility and are now in a stable condition.

The Defence Force (ADF) has notified the families of the victims and is investigating the incident.

Afghan and Australian commanders have travelled to the site of the attack.

Troops have been placed on a heightened security alert, as a precaution against any further attacks.

Afghan and Australian commanders have visited the site of the attack to assist in the response and offer support to the survivors.

Australian army cook Lance Corporal Andrew Jones was shot dead by an Afghan soldier in May.

A total of 33 Australians have now been killed in Afghanistan.

Meanwhile, 13 Americans operating under NATO were killed in a car bomb attack on a foreign military convoy in Kabul.

Afghanistan's security force and rescue personnel with NATO troops in Kabul ( Massoud Hossaini: AFP )

The incident is the deadliest single ground attack against the coalition in 10 years of war in Afghanistan.

The dead Americans, including eight civilians and five soldiers, were travelling in a bus when it came under attack.

The assault on the ISAF convoy took place late in the morning in the Darulaman area in the west of the city, near the national museum.

ISAF spokesman Brigadier-General Carsten Jacobson condemned the bombing.

"It is a waste of human life. It is again an attack that did not only hurt ISAF personnel but also innocent civilian bystanders who were close to this incident," he said.

The former royal palace, now in ruins, is also in the area, along with several government departments, and Afghan and foreign military bases.

The Taliban have claimed responsibility for the attack, saying they packed a four-wheel-drive vehicle with 700 kilograms of explosives.

Violence across Afghanistan is at its worst since the start of the war 10 years ago, according to the United Nations, despite the presence of more than 130,000 foreign troops.

The attack is likely to heighten worries about the reach of insurgent forces as the United States and its allies prepare to hand over responsibility for security to Afghan forces by 2014.