The suicide attacker detonated explosives while in his vehicle, causing the casualties, said Zulmai Ayubi, a spokesman for the Kandahar governor. He did not have further details.
Coalition forces were engaged in an operation to clear areas around the city of Kandahar, a Taliban stronghold, and have said they expect heavy fighting.
A NATO spokesman confirmed one Afghan death and said the blast caused substantial damage to buildings in the immediate area and left a significant crater in the highway. NATO said the wounded civilians were medically evacuated. One coalition vehicle was damaged in the attack.
The Taliban claimed responsibility.
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