A NATO air strike killed two children, an Afghan official said Tuesday, threatening to fuel a row over civilian deaths as a top US commander said foreign troops were halting the Taliban's progress.

NATO said it had targeted suspected insurgents in the raid, which took place near where nine people -- who Afghan officials said were children collecting firewood -- were killed in an air strike earlier this month.

The incident is likely to stoke controversy after President Hamid Karzai rejected an apology by General David Petraeus, the US commander of NATO-led troops in Afghanistan, over the earlier incident in eastern Kunar province.

"Last night, two children who were irrigating their land were hit by a coalition air strike and both were killed," Abdul Marjan, the district chief of Sawkai in Kunar, told AFP.

One local resident said the dead were two boys, aged nine and 15, and a spokesman for the International Security Assistance Force (ISAF) said it was investigating the claims.

"Last night we observed two suspected insurgents placing an IED (improvised explosive device) in the road. After we positively identified them, we called an air weapons team in, killing one and injuring another," the spokesman added.

Civilian casualties in military operations are a sensitive issue in Afghanistan as coalition troops battle to curb a Taliban-led insurgency ahead of a planned handover of security responsibilities to Afghans in 2014.

On Saturday, while visiting the relatives of those hit in the Kunar strike, Karzai apparently called for foreign forces to "stop their operations in our land," although his spokesman insisted he was merely urging an end to civilian casualties.

Karzai refused Petraeus's apology over that strike, while US Defense Secretary Robert Gates also said sorry during a visit to Afghanistan last week.

The Afghan president argues that civilian deaths in military operations turn people against his pro-US administration and help the Taliban to recruit more fighters.

Petraeus said Tuesday that coalition forces had halted the march of Taliban militants in parts of Afghanistan, but warned the progress made since thousands of troop reinforcements were deployed in 2009 was "fragile and reversible."

"It is ISAF's assessment that the momentum achieved by the Taliban in Afghanistan since 2005 has been arrested in much of the country and reversed in a number of important areas," Petraeus told US lawmakers.

There are now 97,000 US forces on the ground fighting alongside 45,000 troops from NATO countries as part of the international coalition put in place after US-led troops ousted the Taliban from power in late 2001.

The progress made in the past months meant the coalition would in the coming months begin transferring responsibility for security to Afghan forces in many provinces, Petraeus said.

However, the International Committee of the Red Cross (ICRC) said Afghan civilians had suffered a "dramatic deterioration" in security in the first two months of the year and described the situation as "untenable."

"People tell us that they are caught in the middle of the conflict and they don't know which way to turn," the ICRC's head of delegation Reto Stocker said.

"It is an untenable situation. Civilians must be protected from harm as much as possible, not become victims of the fighting."

A UN report last week revealed that the deaths of Afghan civilians in the war had increased 15 percent to a record high last year, adding that insurgents were responsible for three-quarters of the killings.

Elsewhere in Afghanistan Tuesday, officials said a school head teacher and a provincial lawmaker were killed in two separate explosions in the eastern Nangarhar and Laghman provinces.

In southeastern Khost province, four policemen were seriously wounded when a remote-controlled mine hit their vehicle.

The interior ministry in Kabul also announced it was dissolving seven of the private security companies which provide protection for many embassies, NGOs and other international organisations in Afghanistan.