Insurgents shot at Canadians soldiers in Kandahar City late Tuesday, as they passed by the site of a 27-kilogram bomb that had been found and disarmed just an hour before.
No Canadians were injured as they returned fire. About half a platoon had come under attack.
Troops are establishing themselves at areas considered to be at high-risk for insurgent attacks in the city. The heightened activity came as the Canadian military dismissed rumours of a potential offensive with with Taliban, who have apparently gathered just north in the Arghandab district.
Four plane-loads of soldiers were flown into Kandahar on Tuesday after the Taliban reportedly moved into villages in the area.
"It is clear that Kandahar City remains firmly under control of the Afghan government and its people," said Dave Corbould, battle group commander with Canada's Joint Task Force Afghanistan.
"Indeed, having just returned from the Arghandab district centre, I can tell you there were no obvious signs of insurgent activity. While this does not mean that the Taliban are not there, it just means that they don't appear to have the strong foothold they apparently claimed."
Earlier Tuesday, a NATO spokesperson also downplayed the prospect of a looming battle in the district, even as NATO was dropping leaflets there warning people to stay indoors.
Mark Laity said the coalition conducted a patrol through the area "and found no evidence that militants control the area."
However, he also said the leaflet dropped by air carries the following message: "Keep your families safe. When there is fighting near your home, stay inside while ANSF (Afghan security forces) defeat the enemies of Afghanistan."
Laity said 700 Afghan National Army troops have been moved from Kabul to Kandahar to deal with the threat.
Canadian officials in Kandahar say claims that Taliban fighters have "taken over" villages are exaggerated, although they don't dispute reports of bombed-out culverts or planted landmines.
They say the Taliban have made their presence felt in a handful of villages to frighten locals into supporting them.
Locals do appeared to be frightened. Residents of Arghandab have been fleeing as they fear a major clash between Taliban rebels, who reportedly took control of up to 10 villages on Monday, and coalition forces.
They are pulling out in the middle of grape harvest season, thus putting themselves at risk of financial ruin.
"(The Taliban) told us to leave the area within 24 hours because they want to fight foreign and Afghan troops," said Hajib Ibrahim Khan, who fled Arghandab on Tuesday.
"But within a week, we should be harvesting and we were expecting a good one. Now with this fighting we are deeply worried -- the grapes are the only source of income we have."
Arghandab, a lush farming area, sits about 15 kilometres north of Kandahar City, the second-largest city in Afghanistan.
Taliban spokesman Qari Yousaf Ahmadi told The Canadian Press in a telephone interview that more than 500 Taliban are in the Arghandab.
"We are going to start an operation by the name IBRAT, which stands for (Learn a lesson from past deeds and doings)," he said.
The Taliban have reportedly planted mines and destroyed culverts and small bridges.
Sardar Mohammad, a police officer manning a checkpoint, told The Canadian Press that four planeloads of Afghan National Army soldiers have been flown in from Kabul.
Canadian soldiers have also moved in and are awaiting the order to attack, he said.
Show of force
Ahmadi said the Taliban have burned several schools in Arghandab and are threatening anyone who works with coalition or government forces.
"As everybody knows, we have (already) killed so many people who were working with coalition forces or working with international organizations," he said.
Peter Powers, a former British counter-terrorism official, told Canada AM that this flare-up shows that a foreign military presence will be required in Afghanistan for some time to come.
Unfortunately, if one builds up foreign forces, more casualties will inevitably result, he said.
The developments in Arghandab come after a spectacular attack last Friday on Sarposa Prison in Kandahar. About 400 Taliban fighters were among those who escaped.
Omar Samad, Afghanistan's ambassador to Canada, told Canada AM that institutions like Sarposa need to be better protected. "This wasn't a professional jail. This was a building that became a jail over time," he said.
Building up such infrastructure is "still a work in progress," Samad said.
Critics have noted the jail -- whose entrance was blown apart by a Taliban truck bomb -- had mud walls and a creek running through it, with an occasional landmine floating through.
With files from The Canadian Press and The Associated Press
