Afghan forces have "retaken" control of the northern city of Kunduz from Taliban insurgents after fierce fighting overnight, Afghan government officials say.

"[Afghan] Special forces now control Kunduz City, it is retaken and being cleared [of] terrorists, heavy causality to the enemy," interior ministry spokesman Sediq Sediqqi said on Twitter.

Key points: NATO sends troops to help Afghan army reclaim Kunduz from the Taliban

NATO sends troops to help Afghan army reclaim Kunduz from the Taliban Kunduz is the first provincial capital to fall to the Taliban since 2001

Kunduz is the first provincial capital to fall to the Taliban since 2001 Concerns mount throughout the country about the re-ignited fighting and takeover

Afghan forces, hamstrung by a slow arrival of reinforcements but backed by US air support, struggled to regain control of the city after three days of heavy fighting.

Deputy interior minister Ayoub Salangi said the city had been recaptured after a "special operation" overnight.

However, Taliban spokesman Zabihullah Mujahid said the fighting was continuing.

"Enemy claims regarding the Kunduz situation are not true. Mujahedeen are resisting in the city's security circle," he said, adding the Taliban still controlled most of the city and surrounding districts.

"American forces are also involved in this fight but we are still defending."

Afghan forces were seen in the centre of the city and the streets were littered with Taliban bodies, a Kunduz resident told the AFP news agency, adding that fighting was still ongoing in parts of the city.

The Taliban's occupation of Kunduz sent thousands of panicked residents fleeing, dealt a major blow to the Afghan military and highlighted the insurgency's potential to expand beyond its rural strongholds.

Security officials said the militants had slowly infiltrated Kunduz during the recent Eid festival, launching a "Trojan horse" attack that enabled them to capture it within hours.

Marauding insurgents captured government buildings and freed hundreds of prisoners, raising their trademark flag throughout the city.

But early on Thursday "Afghan soldiers took down the white-and-black Taliban flag in the city square and hoisted the government flag", Kunduz resident Abdul Rahman said.

The fall of the city coincided with the first anniversary of president Mohammad Ashraf Ghani's national unity government, and raised questions about the capabilities of Afghan forces as they battle the militants largely on their own after NATO's combat mission ended last December.

It also renewed questions about Washington's plan to withdraw most US troops from Afghanistan next year.

Even after years of training and equipment purchases — on which Washington spent $US65 billion — Afghan forces have been unable to rein-in the ascendant insurgency.

AFP/Reuters