Afghan National Army soldiers patrol the outskirts of Kandahar in southern Afghanistan on Tuesday. (Allauddin Khan/Associated Press)

Canadian and Afghan troops killed 36 Taliban militants Wednesday, following fighting in the forests and orchards surrounding the city of Kandahar where insurgents had infiltrated the area, officials said.

At least two Afghan soldiers were killed in the hour-long firefight, said the CBC's Paul Hunter, who witnessed the battle in the Arghandab region, about 15 kilometres northwest of Kandahar.

"We watched the soldiers march towards these orchards. Shooting broke out. The Taliban fired at them, they fired back. You had a helicopter overhead, firing toward the ground," Hunter said.

While NATO spokesman Mark Laity said Afghan and Canadian troops only had a "a few minor contacts" with Taliban fighters during the battle, the Afghan Defence Ministry indicated the fighting was much heavier, claiming that 20 Taliban fighters were killed in the Arghandab village of Tabin, and 16 were killed in the nearby village of Khohak.

Hunter said Canadians are playing a secondary role in the battle, acting as mentors to soldiers in the Afghan National Army, which is in a building process. Two Afghan battalions participated in the Arghandab attack, but one of them was forced to retreat after coming under heavy fire.

"This whole process is about teaching the Afghans how to set up an army. About half the Afghans turned and fled, so there's clearly some work to be done," Hunter said. "It wasn't a complete success today, but I suspect they'll be back at it again. It was quite an operation by the Afghans and supported by the Canadians."

NATO spokesman James Appathurai said the Afghan army has come a long way. Last year, it would not have had the ability to mobilize as it did for Wednesday's battle, flying in hundreds of troops from across Afghanistan, Appathurai said.

"Their capability to do this, to lead this operation, is so much more advanced than we saw a year and a half ago. I think we should be encouraged by that," Appathurai told CBC News in an interview from Brussels on Wednesday morning.

Battles come after Friday's prison break

Wednesday's battle came after a bold attack Friday on Kandahar's prison, during which insurgents managed to set free 400 suspected Taliban militants.

Militants have moved into the Arghandab region since then, although estimates of their numbers have varied widely, from 150 to 650. Afghanistan's Ministry of Defence said Tuesday that 300 to 400 militants are in the area.

Appathurai said NATO's goal with Wednesday's battle was to clear Arghandab of Taliban fighters to ensure that the Afghan government does not lose control of the city of Kandahar,

'This whole process is about teaching the Afghans how to set up an army. About half the Afghans turned and fled, so there's clearly some work to be done.'

—Paul Hunter, CBC News

"We don't believe, frankly, [that Kandahar] is under any kind of threat from the Taliban, but we certainly want to ensure that it remains safe, and we want to assure the population."

He said he has no doubt NATO will ultimately triumph over the Taliban.

"If they stand and fight, they will lose," Appathurai said of the Taliban. "If they don't stand and fight, they will leave. One way or another we have the forces necessary to do what we intend to do, and that is to ensure that area remains under Afghan control, and Kandahar state is secure."

Local police and residents said the Taliban destroyed bridges and planted mines in Arghandab on Tuesday, in what appeared to be preparations for a battle with Canadian and Afghan troops. The Taliban had reportedly seized villages, although on Wednesday, provincial leader Ahmed Wali Karzai said many Arghandab villages have now been cleared of insurgents.

Residents fled the region in fear on Monday night and Tuesday, crossing into Kandahar with as many belongings as they could carry. Some officials said up to 1,500 families had left, although those numbers couldn't be confirmed. Hunter said while reports of villagers fleeing were rampant, he also saw villagers gathering at markets and going about their daily lives in Arghandab on Wednesday.

"It's very difficult to determine what the truth is," Hunter said, referring to the number of Taliban fighters in the area and the number of villagers who have left.

He noted that the Taliban tends to inflate all numbers, while NATO officials have consistently offered lower tallies.

Arghandab a strategic region

Haji Agha Lalai, a council member for the province of Kandahar, said the militant group's move into Arghandab is a strategic one. The lush region, filled with pomegranate and grape fields, offers good cover for fighters.

"From a strategic military point of view, Arghandab is a very good place for the Taliban," Lalai said.

"Arghandab is close to Kandahar city, allowing the Taliban to launch ambushes and attacks more easily than any other place in the province. Secondly, it's covered with trees and gardens — they can easily hide from air strikes."

NATO is overseeing the foreign mission in Afghanistan, which Canada joined in February 2002 following the U.S.-British invasion in October 2001. Roughly 2,500 Canadian soldiers are currently serving in the war-torn country, mostly in the province of Kandahar.

The United Kingdom's troops were hit hard on Tuesday. Four British soldiers were killed when an explosive was detonated against their vehicle during a patrol in the southern Helmand province. At least one other soldier was wounded.

With files from the Associated Press and Canadian Press