NATO said its overnight bombardment killed most of a group of 30 insurgents and blamed them for the deaths of any innocents, saying they had launched "irresponsible" attacks from civilian homes.
Afghan President Hamid Karzai criticized the rising civilian toll from NATO and U.S.-led military operations as "difficult for us to accept or understand."
The police posts came under fire late Thursday in Helmand province's Gereshk district, provincial Police Chief Mohammad Hussein Andiwal told The Associated Press.
NATO responded by calling in airstrikes, which killed 20 suspected militants - but also 25 civilians, including nine women, three babies and the mullah or religious teacher at the local mosque, Andiwal said.
Taliban used at least two civilian compounds for cover during the clashes, which lasted into early Friday, Andiwal said.
"NATO was targeting the areas where the fire was coming from ... and two compounds were completely destroyed, and the families living in those compounds were killed," he said.
Villagers loaded the victims' bodies onto tractor trailers to take them to the provincial capital, Lashkar Gah, to prove they were innocent victims, but police stopped them, Andiwal said.
NATO said the aircraft struck after insurgents attacked troops from its International Security Assistance Force 14 kilometers (9 miles) northeast of Gereshk town.
"A compound was assessed to have been occupied by up to 30 insurgent fighters, most of whom were killed in the engagement," an alliance statement said.
Lt. Col. Mike Smith, a NATO spokesman, expressed concern about the reports of civilian deaths. However, he claimed that - because insurgents had chosen the time and location for the attack - "the risk to civilians was probably deliberate."
"It is this irresponsible action that may have led to casualties," he said.
If confirmed, the casualties in Gereshk would bring the number of civilians killed in NATO or U.S.-led military operations this year to 177, according to an Associated Press tally of figures provided by Afghan officials and witness reports.
Some 169 civilians were killed this year in militant attacks, which have included a spate of suicide bombings.
Aid groups and other observers warn that anger at the mounting civilian toll is undermining support for foreign troops' presence and setting back their goal of securing Karzai's Western-backed government against a Taliban comeback.
NATO acknowledged late Thursday for the first time that civilians had died in a three-day battle that began last weekend in Chora district of Uruzgan province.
Afghan officials have said that more than 100 people, including militants, civilians and police, were killed.
"Some may have been killed at the hands of the Taliban, some may have been caught in crossfire and some may have died in airstrikes against enemy positions," NATO spokesman Smith said.
He said it was impossible to say how many people died before NATO and Afghan forces re-established control of the area, after the Taliban overran three police checkpoints.
"No matter the cause, we mourn any loss of innocent life. We are here to help provide safety and security to the people of Afghanistan, so even a single death is cause for sadness," Smith said in a statement.
Karzai's government has repeatedly protested NATO's frequent resorting to massive firepower, and has pleaded for closer coordination with Afghan officials to avoid civilian losses.
Karzai told the British Broadcasting Corp. in an interview Thursday that the issue of civilian deaths is "becoming difficult for us to accept or understand."
"Every effort has to be made for it to stop," Karzai told BBC. "Every detail has to be worked out for it in order for civilians to stop being casualties."