Nato troops are now working to secure Marjah in the offensive
Nato has confirmed that two rockets fired at militants during its offensive in Helmand, south Afghanistan, missed their target and killed 12 civilians.
The rockets struck a house in Marjah as thousands of Nato troops continued their operations to oust the Taliban.
Nato's commander Gen Stanley McChrystal said that "we deeply regret this tragic loss of life".
Coalition forces are aiming to build on gains in Operation Moshtarak, tackling snipers and booby-traps on day two.
A third Nato death related to the operation has also been confirmed.
Operation Moshtarak, meaning "together" in the Dari language, is the biggest coalition attack since the Taliban fell in 2001.
The operation is also the first big test of US President Barack Obama's new "surge" strategy for Afghanistan.
Rocket system suspended
Civilian casualties have been a key concern for the Nato-led offensive.
Civilian deaths a key concern to Nato
The regions targeted were leafleted well in advance to try to minimise casualties.
President Hamid Karzai has called for an investigation into the civilian deaths, his office said.
Frank Gardner, BBC News, Kandahar
Building by building, compound by compound, US Marines and British troops are trying to clear Marjah and Nad Ali district of hundreds, possibly thousands, of booby traps planted by insurgents. The US military told me they had started receiving tip-offs from local residents about where the bombs were hidden.
Many of those residents are believed to be cautious about welcoming government forces for fear they will soon depart again. Tribal councils are being held in both districts with the aim of persuading the population to back their government and not the Taliban.
According to a senior Nato officer joint Afghan-Nato patrol bases will soon be set up in the area, and 900 newly trained Afghan police are poised to come into re-establish government control.
The office said in a statement that it believed at least 10 of those killed were from the same family.
Nato said in a statement: "Two rockets from a High Mobility Artillery Rocket System launched at insurgents firing upon Afghan and [Nato] forces impacted approximately 300 metres (980ft) off their intended target, killing 12 civilians."
Gen McChrystal said: "The current operation in Central Helmand is aimed at restoring security and stability to this vital area of Afghanistan.
"It's regrettable that in the course of our joint efforts, innocent lives were lost.
"We extend our heartfelt sympathies and will ensure we do all we can to avoid future incidents."
The use of the rocket system involved has been suspended pending a review.
The BBC's Frank Gardner in Kandahar says the deaths are very damaging for a campaign aimed at protecting the local population and driving a wedge between them and the insurgents.
MARJAH: 'TALIBAN STRONGHOLD'
Town and district about 40km (25 miles) south-west of Lashkar Gah
Population of town estimated at 80,000; Marjah district: 125,000
An area of lush vegetation and farmland
Last remaining major Taliban stronghold in southern Helmand
Considered a centre for assembling roadside bombs
Lucrative supply centre for opium poppies, a Taliban revenue source
Estimates of Taliban numbers ranged from 400 to 1,000
American forces, led by 4,000 Marines, are focusing on Marjah, while 4,000 British troops are in Nad Ali.
A large Afghan force, as well as Canadians, Danes and Estonians, is also involved.
Three Isaf deaths related to Operation Moshtarak have been confirmed.
On Saturday, a British soldier, Lance Sergeant David Greenhalgh of 1st Battalion Grenadier Guards, died in an improvised explosive device (IED) attack, while a US soldier was killed by gunfire in Marjah.
On Sunday, another service member was killed in an IED attack.
At least 20 Taliban fighters were killed and another 11 detained on Saturday, an Afghan commander said.
At a Ministry of Defence briefing in London on Sunday, Maj Gen Gordon Messenger said the operation overall had so far "gone to plan".
"Nothing has stopped the mission from progressing," he said, although UK troops had taken small-arms fire.
AFP quoted President Obama's top security adviser, Gen James Jones, as also saying the offensive was "going well".
President Obama will be briefed on Sunday by the US commander in Afghanistan, Gen Stanley McChrystal.
OPERATION MOSHTARAK: DAY TWO - 14 FEBRUARY 2010
1: British forces find cache of IEDs, along with tunnels and ammunition dumps in this area
2: UK/Danish troops continue to disrupt Taliban movements; small arms contacts reported
3: US and UK forces operating either side of Canal 56 crossings consolidate their hold on the area
4: Bulk of British operations going on in this area; clearing and holding village-by-village
5: US forces continue air and ground assaults; On the outskirts of Marjah two rockets miss their targets, striking a house and killing 12 civilians
Source: UK Ministry of Defence
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