Afghan government investigators have told the BBC that 65 civilians, including 50 women and children, were killed in a Nato operation last week.
But the Nato force, Isaf, says its initial findings show that no civilians were killed in Kunar province.
It said more than 30 insurgents died in an overnight raid in the area.
On Sunday, the provincial governor said civilians had been killed in recent Nato-led air strikes in a remote mountainous district.
Afghans - from President Hamid Karzai down - believe that in Kunar province, indiscriminate Nato firepower killed 20 women, 29 children, and more than a dozen unarmed men.'Propaganda'
Nato believes there was not a single civilian casualty from its operation in Kunar.
It says that pro-Taliban villagers have created a propaganda story that was taken up by politicians in Kabul eager to prove their nationalist credentials.
The incident happened a week ago in a mountainous and sparsely populated area of the country.
Nato was carrying out a three-day offensive against Taliban fighters, using Apache attack helicopters equipped with 30-mm cannon Hellfire missiles.
The key battle was fought over a five-hour period, at night, in rugged terrain.
No video or photographs have yet emerged either of the operation or, crucially, of any bodies.
But the head of the Afghan investigation team said that victims were burned beyond recognition and buried in a mass grave.
One man from the village said that people were killed after they fled, terrified, from their homes.
He was speaking from the nearest hospital where people were being treated apparently for burns.
Some Nato officers believe that village elders may have burned the hands and feet of children and sent them to hospital to create the impression of an incident involving civilians - adding to pressure to halt the operation.
It is claimed that this suggestion was repeated in a meeting between the Nato commander, General David Petreaus, and President Karzai this week.
The president's spokesman called it "outrageous, insulting and racist".Deepening rift
The rift will only deepen now that the official investigation set up by President Karzai has directly contradicted Nato's version of events.
The investigation team has just returned to Kabul and will report that some 36 insurgents were killed but that there is no evidence - from surveillance film of the battle - of any civilian deaths.
More generally, according to the UN, the vast majority of civilian deaths in Afghanistan are caused by the Taliban, not the international forces.
But Afghans are convinced that Nato routinely bombs and shoots innocent people - and that belief is one of the things that keeps the insurgency alive. BBC News