The governor of Afghanistan's Kandahar province says Afghan and NATO-led forces have killed or wounded "hundreds" of insurgents on the outskirts of Kandahar city.

"The Taliban have been cleared totally from Arghandab district," governor Assadullah Khalid told a news conference.

"They have suffered hundreds of dead and wounded and many of their casualties are Pakistanis."

He says troops are now searching the area for militants who could be hiding in villagers' houses.

Earlier on Thursday, NATO and Afghan forces attacked Taliban militants dug in around the district of orchards and farms on the city outskirts for the second day, in one of the biggest battles in Afghanistan in recent years.

The offensive, which NATO said it expected to last until the weekend, is aimed at an estimated 600 Taliban fighters at the Arghandab valley, north-west of Kandahar.

It comes days after the Taliban freed hundreds of their comrades from the main jail in Kandahar city.

NATO had earlier downplayed the number of militants in the area.

"So far our assessment is that if the insurgents are there they have not the numbers and the foothold that they previously claimed and, obviously, they did choose not to fight," ISAF spokesman General Carlos Branco said.

General Branco says NATO forces used air power only against "positively identified groups of insurgents that targeted one helicopter, which acted in self defence".

He says only one civilian was killed in the fighting, according to their information, while a second Afghan civilian, two Afghan soldiers, three ISAF civilian workers and NATO television cameraman Jamie Kidston, from New South Wales, had all been wounded.

The forces will "continue to progress steadily, avoiding civilian casualties and potential IED's left behind, and we do not expect any dramatic changes in the behaviour of the insurgents," General Branco said.

- AFP/Reuters