The town of Musa Qala in volatile Helmand province was captured by the insurgents on Wednesday, after a week of clashes in which the Taliban claimed to have killed or captured dozens of Afghan forces.
Reinforcements were brought in from neighbouring Kandahar province.
And early today police and troops broke through the Taliban defences in Musa Qala after NATO airstrikes pounded their trenches in and around the district centre, officials said.
"Security forces including army and commando units conducted a successful offensive this morning. They recaptured the district and killed 220 enemy fighters," defence ministry spokesman Dawlat Waziri told AFP, insisting that government forces did not suffer any casualties.
US aircraft from NATO's Resolute Support mission had conducted 18 attacks in the district over the past week, a spokesman for the mission said.
The Taliban have not yet commented on the reports.
Helmand is Afghanistan's main opium-growing area and a stronghold of the Taliban, whose government was toppled in 2001 for harbouring Al-Qaeda leaders after the September 11 attacks on the United States.
Southern Afghanistan, from where the Taliban rose in early 1996, has seen some of the worst of the insurgency.
The hardline Islamist militants have occasionally succeeded in seizing remote districts but are usually evicted shortly thereafter by the 350,000 strong Afghan security forces.
US-led NATO forces ended their combat mission in Afghanistan last December, although a 13,000-strong residual force remains for training and counter-terrorism operations.
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