The civilians, including two women, were beheaded in a southern Afghanistan village in a region plagued by the Taliban insurgency.
"Last night 17 local villagers, two women and 15 men, were beheaded by unknown people in Kajaki district," Daud Ahmadi, a spokesman for the Helmand provincial administration, told AFP.
"We don't know who was behind the killings at this time. We're investigating," Ahmadi said.
A senior police official in the province, Mohammad Ismael Hotak, confirmed the incident, giving a similar account.
Taliban insurgents are active in the troubled region and they have in the past been blamed for beheading local villagers, mostly over charges of spying for Afghan and US-led NATO forces.
Haji Musa Khan, a tribal elder in the neighbouring district of Musa Qala, said the region had seen a surge in such killings in recent months.
"We had three people beheaded during the month of Ramadan. Another person, the son of a tribal elder, was beheaded recently," he said.
Khan said the killings followed major military operations by Afghan and NATO troops in the area.
Hours later, an Afghan army soldier killed two NATO troops in a new "green-on-blue" insider attack, the US-led International Security Assistance Force said.
"A member of the Afghan National Army turned his weapon on ISAF forces, killing two ISAF service members in (eastern) Laghman province today," a spokesman told AFP.
"ISAF soldiers returned fire and killed the attacker."
The latest deaths take the toll from insider attacks this month alone to 12 and to a total of 42 this year, making up around 13 percent of all NATO deaths in 2012.
NATO has struggled to stem the attacks in which uniformed Afghans turn their weapons against their international allies and they have become a major issue in the Afghan war, eroding trust between the two forces.
Taliban insurgents claim responsibility for many of the attacks, but NATO attributes most to cultural differences, stress and personal animosity between Afghan troops and their international allies.
In a pre-dawn attack Monday, 10 Afghan soldiers were killed when Taliban insurgents overran their post in the troubled southern province of Helmand in what one official said was an insider attack.
Four soldiers were wounded and six others were missing following the attack in the province's Washir district, the senior police official Hotak told AFP.
Ahmadi, the Helmand provincial administration spokesman, confirmed the incident and said the attack was an "insider" plot in which some army soldiers helped the rebels attack the post.
"The Taliban attacked a post in Washir and killed 10 soldiers. Four other soldiers were wounded and five others have gone with the Taliban with their guns," he said.
Hotak could not confirm Ahmadi's account but said an investigation was underway.