The Australian troops have shot dead at least five children in a deadly shootout in the troubled southern Afghanistan, the military says.
The incident happened on Thursday in Uruzgan province, where Australia's special forces were clearing a number of houses in the hunt for insurgents.
Australia says it is investigating the incident.
"Current reporting indicates that those killed include a suspected insurgent and, sadly, local nationals including five children killed, and two children and two adults injured," The Australian defense department said in an official statement on Friday.
Australia's military has about 1,100 soldiers in Afghanistan, based mainly in Uruzgan province.
The rising number of civilians killed by US-led troops in the war-torn country has drawn the ire of the Afghans, rising anti-American sentiment in the country.
Afghanistan President Hamid Karzai has also repeatedly lashed out at the US-led forces in his country over their 'unbearable attitude' toward public and local culture and their disregard for civilian lives.
Human Rights campaigners say that the 70,000-strong US-led western troops have been understating the true figures of civilian casualties in official reports, in a bid to avoid inflaming the already-widespread opposition to foreign deployment.
Civilian casualties have been the subject of a growing controversy, raising questions over the presence of foreign troops in Afghanistan.
The US military operation 'Enduring Freedom' was launched by the Pentagon forces with Britain and other western countries in response to the September 11, 2001 attacks.
The stated purpose of the invasion was to destroy al-Qaeda and Taliban, capture Osama bin Laden and bring security in the volatile region.