The accident in the Afghan capital occurred when British soldiers part of the International Security Assistance Force (ISAF) opened fire on a minivan, causing it to crash into a shop.
"The vehicle was riding from a subsidiary road to the main road. The British possibly thought these were suicide bombers and started firing at the vehicle," a local police chief, Mohammad Ayoub Salangi, said.
Four other civilians were also injured in the accident, he said. However, locals said four people had died.
Meanwhile, the ISAF rejected the claims of the shooting saying in a statement that it had "received reports that a civilian contractor had been involved in a traffic accident."
"On their arrival, the patrol found a large crowd surrounding the contractors' vehicles," the statement said.
Locals pelted police with stones and bricks and blocked the road to Jalalabad, chanting "death to Bush, death to America."
Afghanistan is facing its worst rise in violence since the U.S.-led international force overthrew the hard-line Islamic Taliban movement in 2001.
The latest incident occurred a day after at least four people died when a suicide bomber attacked a convoy of foreign troops near the U.S. embassy in Kabul.
