(Corrects name to Steinmeier in paragraph 4)

By Tahir Qadiry

MAZAR-I-SHARIF, Afghanistan, May 19 (Reuters) - A suicide bomber killed three German soldiers and six civilians in a crowded street market in northern Afghanistan on Saturday in the latest violence blamed on the Taliban, security officials said.

To the south, militants in Kapisa province engaged Afghan and foreign forces overnight in a battle in which several dozen Taliban fighters were believed to have been killed, the U.S.-led coalition said.

And in Shinwar district near Jalalabad, a remote-controlled bomb killed a police chief and another officer and wounded three others on Saturday, a local official said.

The suicide bombing was the most serious attack on German troops in nearly four years and Berlin's Foreign Minister Frank-Walter Steinmeier called it a "brutal terrorist attack".

Taliban insurgents have stepped up attacks in recent weeks following the traditional winter lull. The Taliban has said it has trained hundreds of suicide bombers.

The spate of attacks this week followed the death of the insurgents' top operational commander, Mullah Dadullah, in a U.S.-led coalition raid last weekend. It was deemed the biggest blow to the Taliban since they were driven from power in 2001.

A Taliban spokesman on Saturday said a "spy" who betrayed Dadullah to U.S. forces had been captured.

"The spy told us, 'I am a U.S. spy and provided information about the Taliban,'" Mullah Shohabudin Atal told Reuters by satellite telephone.

In April, the Taliban released a video showing a 12-year-old boy beheading a man they accused of spying.

UNPOPULAR DEPLOYMENT

In the northern city of Kunduz, the suicide bomber struck when the German soldiers got out of their patrol vehicle to shop at a packed street market where pots, green tea and other goods were sold.

"Suddenly we heard a big sound. We were frightened," said Aziz, a shopkeeper. "We saw very thick smoke and people rushing to escape."

In addition to the seven killed in the blast, at least 14 people were wounded, according to local security officials.

Three German soldiers were among the wounded, two of them seriously, German Defence Minister Franz Josef Jung said.

A Taliban commander claimed responsibility for the bombing and said the death toll was higher.

"Our Taliban mujahid (holy warrior) blew himself up near the German troops and killed more than 10 German soldiers," Mullah Hayatullah Khan said. "It was a very successful suicide attack on foreign troops and dozens of German soldiers were injured."

About 3,200 German troops are deployed in Afghanistan, providing security in northern areas that have been relatively safe until recently. The worst violence has been concentrated in southern parts of the country.

In June 2003, four German soldiers were killed and 29 injured when their bus was attacked.

"With this barbarous act, the assassins are trying to destroy the order in the country which has been painstakingly achieved since 2001," Steinmeier said in a statement on the latest bombing. "Without this foundation, Afghanistan would sink back into civil war and violence."

Many Germans oppose the Afghanistan deployment as their nation struggles to define its international role more than 60 years after the end of World War Two.

In Kapisa province, northeast of Kabul, militants ambushed and tried to trap Afghan and coalition forces before midnight on Friday in the al-Asay valley, a coalition spokesman said.

"Coalition air strikes were called in. Several dozen enemy fighters were believed to have been killed," Major Chris Belcher, a coalition spokesman, said. (Additional reporting by Saeed Ali Achakzai in Spin Boldak)

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