"Knowing what we know now, it would probably not have been a justifiable attack. We don't now believe that we busted a major ring," The Times quoted NATO sources, as saying.
Ten children and teenagers died when troops stormed a remote mountain compound near the border with Pakistan in Dec 2009.
Officials had claimed that the victims were involved in making and smuggling improvised explosive devices.
But NATO sources now admit that victims were all aged 12 to 18, and were not involved in insurgent activity.
Afghan investigators, local officials and MPs from the province all maintain that the boys were innocent.
Mohammed Afzal, Narang's district police chief, insisted that US special forces were involved in the raid.
The Independent Human Rights Commission said that more than 63 civilians had died in the past two weeks.