* NATO confirms air strike, checks report of 'friendly fire'

* Search continues for two missing Americans

* Taliban say holding bodies

(For more stories on Afghanistan, click [ID:nAFPAK])

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 said none of its troops were killed but five were wounded, along with at least 20 Afghans, in a battle that 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, adding that other members of the Afghan security forces were wounded.

Lieutenant Todd Vician, a NATO press officer, confirmed that NATO had launched air strikes during the search operation but said the force was still investigating whether its strikes were responsible for friendly casualties.

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 has said the militants recovered their bodies.

NATO says the search is still under way.

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

Troops from more than 40 nations are members of the nearly 110,000-strong NATO-led force, two-thirds of them American. (Reporting by Peter Graff and Yara Bayoumy; editing by Ralph Boulton)

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