Afghanistan's president Hamid Karzai called for Nato troops to leave Afghan villages after 16 civilians died in a shooting rampage by a US soldier, underscoring Afghan fury over the massacre and clouding US exit plans.
In a near-simultaneous statement, the Taliban said they were suspending embryonic peace talks with the United States seen as a strong chance of ending the country's decade-long war, blaming "shaky, erratic and vague" US statements.
Mr Karzai, in a statement from his office after meeting US defence secretary Leon Panetta, said as a result of the weekend massacre, "international security forces have to be taken out of Afghan village outposts and return to (larger) bases".
The soldier accused of carrying out the shooting was based at a small special forces compound similar to others around the country which underpin Nato's counter-insurgency strategy ahead of a 2014 deadline for most Western combat forces to pull out.
Mr Karzai said the incident had harmed relations between Afghanistan and the United States and said "all efforts have to be done to avoid such incident in the future", warning it also had hurt the trust Afghans had in foreign forces.
The killings in Kandahar province on Sunday have raised questions about Western strategy in Afghanistan and intensified calls for the withdrawal of foreign combat troops.
The Taliban statement - delivered in English as Mr Panetta left the country - was another blow to Nato hopes of a negotiated settlement to the war.
US and Taliban negotiators were believed to have had preliminary contacts aimed at establishing an office for the Taliban in the Gulf state of Qatar to launch peace negotiations.
"The Islamic Emirate has decided to suspend all talks with Americans taking place in Qatar from (Thursday) onwards until the Americans clarify their stance on the issues concerned and until they show willingness in carrying out their promises instead of wasting time," the group said in a statement.
The Taliban also said talks with Mr Karzai's government were pointless and none had taken place.
Earlier today, a senior US commander defended moving the American soldier accused of the Kandahar village killings to a military detention centre in Kuwait, saying it would help ensure a proper investigation and trial.
Furious Afghan civilians and members of parliament have demanded the staff sergeant be tried in Afghanistan over the shooting, one of the worst of its kind since US-backed Afghan forces toppled the Taliban in late 2001.
Mr Panetta, in Kabul on a two-day visit to try to soothe Afghan anger, discussed the massacre with Mr Karzai at his heavily guarded palace and faced demands from the Afghan leader that any trial be transparent.
"I assured him first and foremost that I shared his regrets about what took place. I again pledged to him that we are proceeding with a full investigation here and that we will bring the individual involved to justice. He accepted that," Mr Panetta told reporters before leaving Afghanistan.
Tension has risen sharply since the killings and the burning of copies of the Koran at the main Nato base in the country last month, adding urgency to Mr Panetta's visit.