The Taliban, who already control almost all of Sangin district, said on Wednesday that they had captured police and administrative buildings in the district centre, where small groups of police had been holding out.
Afghan forces battle to hold off Taliban in Helmand district
However government officials have denied the claim and said they have pushed back the insurgents. The Taliban are seeking to re-establish their hard-line Islamist regime after being toppled by US-led military intervention in 2001.
General Abdul Wodud, a senior army commander, said a joint Afghan and NATO operation backed by air support had driven the Taliban back from central areas, killing 60 Taliban fighters and wounding 40.
NATO headquarters in Kabul confirmed that the air strikes had taken place but gave no details.
Taliban treated alongside angry soldiers in Afghan hospital
"US forces conducted two strikes in Sangin district, Helmand Province, December 23, against threats to the force," US Army Colonel Michael Lawhorn said.
The Taliban already held three Helmand districts as well as large parts of the rest of the province outside the main centres and control key strategic roads, making it hard to reinforce and resupply security force units cut off by their advance.
But the loss of Sangin, which British and US forces fought for years to control, would be a heavy blow for Western powers backing President Ashraf Ghani's government, now fighting alone since international forces ended combat operations last year.
US, NATO signal willingness to slow Afghan drawdown
NATO military advisers have been sent to Helmand, with an extra British contingent arriving this week, but officials say they have a purely advisory role and they have not confirmed reports that special forces units are present.
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