Afghan officials have said Australian soldiers killed two children who were tending cattle.
The two children, aged seven and eight, were killed on Thursday morning as Australian soldiers fought against insurgents in the southern Uruzgan province, said provincial governor Amir Mohammad Akhundzada.
Akhundzada told AFP: "The children were killed by Australian troops, it was a mistaken incident, not a deliberate one," adding that insurgents had first shot at a helicopter carrying Australian soldiers.
A spokesman for Nato's International Security Assistance Force in Kabul said he couldn't confirm details, but said: "We are aware of the reports and we take all such reports very seriously.
"An incident assessment team in Uruzgan is now there looking into it."
Afghan forces are being handed control of Uruzgan, a restive province where the Taliban insurgents have recently held sway.
The bulk of Australia's 1550 troops are based there, and are focused on training Afghan soldiers ahead Nato's withdrawal at the end of next year.
On 13 February, 10 Afghan civilians in Kunar province, including five children, were killed by a Nato airstrike.
Following the attack, Afghan President Hamid Karzai barred local forces from seeking air support from foreign troops in an attempt to prevent civilian casualties.