Insurgents attack Kandahar convoy

None of the Nato-led forces were hurt, but the Canadians say their fire killed an Afghan policeman and a civilian in clashes that followed.

Taleban forces said they carried out the attack.

It comes as international forces prepare for an anticipated spring offensive by the militants.

Recently, insurgents including the Taleban have staged several suicide attacks in Kandahar but this is believed to be the first time they have deployed heavy weapons in the city.

Canadian forces are not confirming the identity of Sunday night's attackers, although the Taleban have claimed the ambush.

The BBC's Charles Haviland in Kabul says that if this is true, it marks a new and bolder type of attack inside the city which is the Islamic militants' traditional heartland.

'Fuel resentment'

The insurgents struck shortly before midnight using rocket-propelled grenades and small arms to attack a Canadian convoy which was crossing the city.

A Canadian military spokesman told the BBC several armoured vehicles were damaged, forcing the convoy to stop again.

It then came under renewed small arms fire and the spokesman said two local people were killed by Canadian retaliatory fire.

He said the civilian was killed after ignoring warnings to move away during the fire-fight and described the deaths as 'very regrettable'.

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