Mullah Akhtar Mohammad Usmani's vehicle was reportedly hit in an air strike in Helmand province in south Afghanistan.

The US said Mullah Usmani was the chief Taliban military commander in southern Afghanistan - the scene of heavy clashes between the Taliban and US-led forces.

A Taliban spokesman is said to have dismissed reports of his death. An Islamist insurgency spearheaded by the resurgent Taliban militia is at its strongest in the southern Afghan provinces bordering Pakistan.

US military spokesman Col Tom Collins said Mullah Usmani "had been deeply involved in terrorist acts against the people of Afghanistan, Nato and the government".

"He was a top commander of Taliban operations in the south and now he's no more."

Col Collins said Usmani was one of four commanders at the top of the Taliban's hierarchy and had also been in charge of the militia's finances.

He was reportedly close to the Taliban's fugitive leader, Mullah Mohammad Omar, and to al-Qaeda chief, Osama bin Laden.

Two people travelling with Mullah Usmani also died in the air strike on his vehicle, the US military said. The attack reportedly took place on Tuesday.

A Taliban spokesman quoted by the Reuters news agency denied the commander had been killed.

"He is not present in the area where American forces are claiming to have killed him, " commander Mullah Hayat Khan said.

"The American and Nato forces from time to time make such false claims. It's just propaganda against the Taliban."

Meanwhile, the UN Security Council has expressed "deep concern" at the escalation of fighting in Somalia and called on both sides to return to peace talks.

It has called on the transitional government and the Islamic militia that controls most of southern Somalia to refrain from any hostile action.

The two sides have clashed for four days running near the town of Baidoa where the government is based.

Ethiopia, which has never formally acknowledged sending troops to Baidoa, has demanded that the Union of Islamic Courts (UIC) militia stop its offensive there.