The demonstration in Kabul was the largest anti-American protest since the crisis sparked by the September 11 terror attacks in New York and Washington.

Shouting "Long live Osama!" and "Death to America!" the protesters burned US flags and an effigy of the US president, George Bush, before storming the old embassy compound.

The building has been abandoned since 1988.

Grey smoke billowed into the sky after about five vehicles were set afire in the embassy compound, and several men used hammers to remove the large circular US seal above the front entrance.

Taliban authorities eventually dispersed the protesters, and the vehicle fires were put out.

Meanwhile, in northern Afghanistan, heavy fighting was reported as an opposition alliance pressed on with its bid to seize territory from the Taliban.

New battles broke out in the provinces of Samangan and Balkh between Taliban and opposition fighters.

Mohammed Ashraf Nadeem, a spokesman for the opposition's Northern Alliance, said both sides used artillery, rocket launchers, tanks and machine guns, but that neither had managed to take over new territory.

Mr Nadeem said the Taliban had rushed 3,000 new troops to the region from Kandahar, the southern city where the Taliban are based.

No casualty toll was immediately available, and it was not possible to independently confirm his account of the fighting.

Meanwhile, US officials extended their stay in Pakistan's capital, Islamabad, in order to reach a full agreement on a plan for attacks on bases inside Afghanistan, Pakistani sources said.

Pakistani and US defence and intelligence officials have been talking since Monday and have reached a broad agreement on an anti-terror programme including an agreement to minimise the use of ground forces in any strike.

Today the two sides were holding a final round of talks to agree on whether to lend support to the opposition alliance in Afghanistan, a move that Pakistan does not support.

Officials will also discuss what action is warranted against Pakistan-based militant groups and whether or not the United Nations should approve any operation against Afghanistan.

Some differences were resolved yesterday when some of the US delegation members held a 40 minute meeting with Pakistan's president, General Pervez Musharraf, the sources said, without specifying which points had been resolved.