President Hamid Karzai's government called the strike unjustifiable.
Nato aircraft bombed a convoy of vehicles on its way from Daykundi province to Kandahar, killing at least 33 people, including women and children, and wounding at least 12 others.
In a statement, Nato admitted the mistake, saying that its airmen believed they were firing on insurgents and promising in immediate investigation into the incident.
General Stanley McChrystal, the commander of foreign forces in Afghanistan, earlier
apologised to President Hamid Karzai, the second time in a week that he has had to do so.