UPDATE 1-Afghans killed during search for missing US troops

* NATO confirms deaths, checking whether air strike to blame

* Search continues for two missing Americans

* Taliban say holding bodies

(Adds NATO confirmation of Afghan deaths)

KABUL, Nov 7 (Reuters) - NATO forces mistakenly killed seven Afghan soldiers and police in an air strike during a battle while searching for two missing American soldiers in Afghanistan, the Afghan Defence Ministry said on Saturday.

The NATO-led force confirmed the deaths and said it was investigating whether its air strikes were responsible. It said an eighth Afghan, a civilian working with the military, was also killed, and 18 Afghans and five American soldiers were wounded.

The battle took place on Friday during a manhunt for the two soldiers who went missing on Wednesday.

"Yesterday, in a NATO air strike, seven Afghan (soldiers and police) were martyred in Badghis province," Afghan Defence Ministry spokesman General Zaher Azimy said.

Friday's battle took place during a search and rescue operation for two soldiers from the U.S. 82nd Airborne Division, who went missing after a resupply mission.

The Taliban and provincial officials in Badghis say the two missing Americans drowned in a river. A Taliban spokesman said the militants had recovered their bodies.

NATO says the search is still under way.

U.S. Navy Captain Jane Campbell, a spokeswoman for the NATO-led International Security Assistance Force (ISAF), said: "We are saddened by the loss of life and injuries sustained during this very important mission."

The force, along with Afghan authorities, was "currently investigating whether some of the casualties were caused by ISAF close air support", NATO said in a statement.

Lieutenant Todd Vician, a NATO press officer, confirmed that the alliance had launched air strikes during the search.

Reports of missing soldiers in Afghanistan are extremely rare and immediately prompt a large-scale military response.

Troops from more than 40 nations are in the nearly 110,000-strong NATO-led force. Two thirds are American. (Reporting by Peter Graff and Yara Bayoumy; editing by Andrew Roche)