Interior Ministry spokesman Zamarai Bashary said that the Afghan forces killed seven militants, who were wearing suicide vests, in Zaranj, the capital of the western province of Nimruz.
"Seven of the bombers were killed in their own explosions or by our forces," General Jabar Purdeli, provincial police chief, said in a news agency report.
He said that the lone surviving militant was holed up inside a government building and the encounter is going.
He added that the militants barged into several buildings, including the provincial council office, justice department and some residences near the city centre, in the suicide attack which took place early in the morning.
He said that the number of casualties are yet to be ascertained.
"There are some civilian casualties, but I can not give any figures at the moment," he added.
The sound of explosions and gunfire could be heard from several buildings away, even from the office compound of the provincial governor, local resident Khial Mohammad said.
"The people have deserted the city and the fighting is still ongoing," he said.
Officials said that the militants have also attacked on eastern district near the Pakistan border.
According to Taliban spokesman Zabiullah Mujahid, the militants attacked Dur Baba in the eastern province of Nangarhar Tuesday, May 4, night.
15 Afghan troops and two militants were killed in the encounter, he added.
However, spokesman for the provincial government refuted Mujahid's claim, stating that none of the Afghan soldiers were killed in the attack.
"The Dur Baba district is under control of Afghan forces," Ahmad Zia Abdulzai said.
Officials said that militants frequently infiltrate Afghanistan from Pakistani tribal areas to launch attack on the government and NATO troops, and then retreat across the border.