U.S. air raid is believed to kill nearly 90 Afghan people when the strike targeted hijacked tankers which were surrounded by villagers to collect fuel.
NATO forces confirmed that they had carried out an air strike, and said their target was insurgents.
Kunduz province Governor Mohammad Omar said as many as 90 people were feared killed, burned alive in the giant blast.
Civilian casualties from NATO strikes have caused outrage among Afghans.
Captain Jon Stock, press officer for NATO's International Security Assistance Force (ISAF), said: "I can confirm that there was an air strike last night or early this morning."
"Too badly burnt"
A Taliban spokesman, Zabihullah Mujahid, said fighters had captured two fuel tankers. One had become stuck in mud by a village, and the fighters went to find a truck to tow it.
Residents came to collect the fuel when the tanker was struck from the air, he said.
Last Mod: 04 Eylül 2009, 12:57
Dozens of relatives gathered at the Kunduz Central Hospital in the provincial capital.
"My brother was burnt when the aircraft bombed the fuel tankers. I don't know whether he is dead or alive," weeping villager Ghulam Yahya told Reuters outside the hospital.
Mohammad Humayun Khamosh, a doctor at the hospital, said 13 people with burns had been brought there for treatment, but none of the dead had been taken to the hospital's morgue because the bodies were too badly burnt.
"It is very hard to collect dead bodies or remains from the blast because the fuel they were collecting was highly flammable," he said.
U.S. President Barack Obama has ordered 21,000 extra troops to Afghanistan this year. More than 103,000 Western troops are in Afghanistan, including 63,000 Americans.
U.S. Defense Secretary Robert Gates signaled on Thursday that he would be open to sending additional troops.