The killings, in a the southern district of Helman, were a reminder of how much power the insurgent group still wields - particularly as international forces draw down and hand areas over to Afghan forces.
The victims were part of a large group that had gathered late on Sunday in the Musa Qala district for a celebration involving music and dancing, said district government chief Neyamatullah Khan. He said the Taliban slaughtered them to show their disapproval of the event.
Many Afghans and international observers have expressed worries that the Taliban's brutal interpretation of Islamic justice will return as international forces withdraw. Under the Taliban, who ruled the country from 1996 to 2001, all music and film was banned as un-Islamic, and women were barred from leaving their homes without a male family member as an escort.
Helmand is one of the areas seeing the largest reduction in foreign troops.
One of the most worrying trends to accompany the drawdown has been a surge in attacks by Afghan forces against their international allies, and another shooting has happened, although it appeared to be accidental.
Two American soldiers were killed by one of their Afghan colleagues in the east, bringing to 12 the number of international troops - all Americans - to die at the of their local allies this month.
But Afghan officials said the attack in Laghman province was a separate case from the rash of recent insider attacks on international forces, because it appeared to have been unintentional.
The incident unfolded when a group of US and Afghan soldiers came under attack. When the troops returned fire and ran to take up fighting positions, an Afghan soldier fell and accidentally discharged his weapon, killing two American soldiers with the stray bullets.
"He didn't do this intentionally. But then the commander of the (Afghan) unit started shouting at him, 'What did you do? You killed two Nato soldiers!' And so he threw down his weapon and started to run," a spokesman added. The US troops had already called in air support to help with the insurgent attack and the aircraft fired on the escaping soldier from above, killing him.
Insider attacks have been a problem for the military coalition for years, but it has exploded recently into a crisis. There have been at least 33 such attacks so far this year, killing 42 coalition members, mostly Americans. Last year there were 21 attacks, killing 35; and in 2010 there were 11 attacks with 20 deaths.
Meanwhile 10 Afghan soldiers were killed in an attack on a checkpoint in the south, and five were either kidnapped or joined their assailants.