The incident took place on the evening of March 25. Afghan officials said earlier that the NATO airstrike had killed at least seven civilians including three children.
The NATO forces attacked a vehicle believed to be carrying 'insurgents' while another vehicle carrying civilians was also hit by the airstrike, the Helmand governor's office said in a statement.
A joint review was conducted by the Afghan and ISAF incident assessment team, NATO said.
Four civilians travelling in the second vehicle were killed and three others injured as a result of the blast, it said.
'Weapon system video demonstrated both vehicles were traveling as part of one movement and motorcycles were observed providing front and rear security,' the statement said.
'This is a deeply regrettable incident,' said Tim Zadalis, the ISAF director of air plans. 'We will apply what we learned in this assessment in future operations as we strive to eliminate civilian casualties.'
Helmand, a Taliban stronghold, is one of the most volatile provinces in Afghanistan. President Hamid Karzai last week named the provincial capital city of Lashkar Gah as one of the seven areas to be handed over to Afghan forces in July for security responsibilities.
Civilian casualties are a major point of contention between the Afghan government and the international forces, mainly from the United States.
Earlier this month, Karzai asked NATO and US forces to stop all operations that cause civilian fatalities, after he saw an injured child who had lost his limb in an airstrike that killed nine children in the eastern province of Kunar.
Afghan Rights Monitor, a human rights organization in Kabul, said 512 civilians were killed by NATO and US soldiers in 2010.
The only surprising thing about this latest atrocity is the emergence of the fact that ISAF has a 'Director of Air Plans'! I wonder if he is on a bonus scheme.