Local people told a significant number of civilians died when at least three 227-kg (500-pound) bombs hit a market there on Wednesday.
British forces say they have no evidence to support this.
Hamid Karzai has also called an inquiry into an attack in Uruzgan Province which allegedly killed many civilians.
Afghan sources allege that around 60 civilians were killed in the US air attack near Tirin Kot, southern Uruzgan, on Monday.
"They shot people who were running out of houses under fire from helicopters, on the fields and everywhere," villager Feda Mohammad told AFP news agency from a hospital in the city of Kandahar.
The US military has said it killed 40 militants but says it will assist the Afghan government's investigation.
The bombing raid in Nawzad was called in by British forces fighting off a sustained attack on the local government compound they are defending.
It is understood the Taleban fighters were within 50 metres of their positions when at least three bombs were dropped in the market area by US aircraft.
It is difficult to know for sure how many people were killed and whether or not they were civilians, as the fighting is still going on and many people have now left the town centre.
Meanwhile, British forces have been continuing their biggest operation since the fall of the Taleban in Sangin Town, which they say is now in the hands of the coalition after weeks of fighting with Taleban militia.Last Mod: 20 Eylül 2018, 18:16