The International Security Assistance Force admitted in a statement late on Friday a "number of civilians were killed along with a large number of insurgents" in the October 24 air strike in Kandahar province in the south.
"ISAF believes that around 70 individuals were killed," the statement said.
"We are satisfied that we identified and targeted a group of insurgents, but it is uncertain how many civilians were among the dead. In addition, it is unclear how many of the civilians were killed as a result of insurgent fire."
NATO's military commander General James Jones apologised on Saturday for civilian casualties in the province.
Jones blamed insurgents for the deaths, saying they had been using ordinary people as cover to avoid ISAF fire.
"In this particular case, sadly there appears to have been loss of life and innocent people who were wounded in a legitimate mission where insurgents were using the cover of the civilian population to make it very difficult for us to get at them," Jones told reporters.
He was speaking at Bagram Air Base at the end of a three-day trip to Afghanistan during which he met President Hamid Karzai and military leaders.
Residents of the Panjwayi area in the province have said between 60 and 85 civilians were killed in the late-night bombing raid, which started on the second day of the Eid holiday marking the end of the Muslim fasting month of Ramazan.
Some have said none of the dead were Taliban, but ISAF has said it believed 48 were militants, including from a group that attacked a base.
On Friday it said 12 of the dead were civilians, while the police put the figure at about 25 with a presidential-appointed commission and a separate ISAF and defence ministry team investigating the incident.
The latest incident, just under two weeks after 20 other civilians were reported killed in ISAF strikes in Kandahar and Helmand provinces, has added to concern about the number of locals being caught up in fighting between the Taliban and the military.
Karzai on Friday again called for foreign troops to take more care and urged better co-ordination with local forces.
ISAF reiterated its "sincere regret" for any civilian deaths and said it was working with the ministry of defence to investigate what had happened.
New York-based rights group Human Rights Watch said in a statement on Saturday ISAF forces needed to take greater precautions to protect civilians.
"While NATO forces try to minimise harm to civilians, they obviously are not doing enough," said Sam Zarifi, Human Rights Watch's Asia research director.
The rights watchdog was critical of ISAF's extensive use of "close air support" to attack insurgent positions, especially the A-10 anti-tank aircraft.
The force should reconsider the use of "highly destructive but hard-to-target weaponry in areas where there is clear risk of considerable civilian casualties," Zarifi said.
ISAF spokesman Major Luke Knittig said at a briefing this week that the force had flown more than 1,000 successful close air support missions in the
past months "and cancelled hundreds more because the risk of harm to innocents was too great."
Knittig told AFP on Saturday the use of air power was "an important advantage to our operations that we employ and will continue to employ."
The civilian casualties had however "given us pause and has us taking a closer look at how we can minimise risk. At the same time can't completely eliminate the risk," he said.

Copyright AFP (Agence France-Presse), 2006