Afghan security forces fought off the attack in Kamdish district of Nuristan province, which began in the early hours of Friday morning, with the help of NATO air strikes, provincial spokesman Mohammad Zarin told AFP.
Zarin said more than 20 militants - who he said had infiltrated the district from across the border in Pakistan - were killed in the counter-attack.
"More than 20 insurgents were killed and as many injured in the counter attack, their bodies still lay in the battlefield," he said.
There were four suicide bombers among the insurgents who tried to target the house of the local police chief.
Six Afghan policemen and four civilians, including the wife of a local police officer, were also killed in the fighting, he said.
Nuristan provincial police chief Ghulamullah Nuristani told AFP that dozens of houses were burned down in the clashes.
NATO's International Security Assistance Force (ISAF) confirmed the coalition had given "close air support" without specifying details.
Taliban spokesman Zabihullah Mujahid said in an email to AFP the militants, who are waging a 10-year insurgency against the Western-backed government of President Hamid Karzai, were behind the attack.
Afghanistan and Pakistan have long blamed each other for Taliban violence plaguing both sides of their porous, mountainous border.
Pakistan says rebels have regrouped in eastern Afghanistan. Afghan and US officials want Pakistan to eliminate Taliban and al Qaeda-linked havens used to launch attacks in Afghanistan.
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@vigilant: ET is dumb
Above pic is of local Pakistani peace militia memebers.....not of talibans
That's what you get for double dealing and allowing TTP safe havens inside Afghanistan. What you accuse Pakistan of, is happening to you.