Nato helicopters dropped leaflets on villages in southern Afghanistan today, warning civilians to leave their homes ahead of an operation to recapture part of a valley seized by hundreds of Taleban fighters.

Refugees fleeing the area also reported that the insurgents were blowing bridges and planting mines in Arghandab district, ten miles north-west of the city of Kandahar, as Afghan and Nato troops rushed to seal off the area.

Escaped Taleban prisoners, freed from Kandahar's Sarposa prison during an audacious jailbreak on friday, are believed to be among the insurgents now setting up position in Arghandab's orchards.

"They told us, 'we want to fight until the death'," a Taleban commander, Mullah Ahmedullah, told the Associated Press news agency, of the inmates who had joined his men's ranks.

"We've occupied most of the area and it's a good place for fighting. Now we are waiting for the Nato and Afghan forces."

Though Nato commanders, who now have 65,000 troops in Afghanistan, have recently claimed to have truncated the Taleban leadership in the south of the country through a series of precision strikes conducted by special forces and aircraft, the last five days have proved that the Islamists are still capable of conducting well planned operations, deploying large groups of fighters at speed to areas of symbolic importance.

Just two days before they moved into Arghandab, the Taleban released more than 350 captive fighters held in Sarposa during a spectacular and successful operation. The prison walls were breached by at least two suicide bombers, while storming parties killed up to 15 guards. More than a thousand inmates fled, as Taleban waiting in cars and on motorbikes spirited escaping insurgent members away to safety.

Arghandab may prove an even bigger headache to Nato, who are attempting a more holistic approach to their counter-insurgency operations in Afghanistan this year. Bisected by a river and numerous irrigation ditches, the fertile district is a natural defensive location, with thick cover afforded by grape fields and pomegranate orchards. It was a bastion of resistance against Soviet troops during their occupation of Afghanistan, and was never fully subjugated.

Dominated by the warlike Alokozai tribe, the district's position is furthermore one of key importance in deciding the fate of Kandahar, itself the centre of political gravity in southern Afghanistan.

Mullah Naqib, the Alokozai's tribal leader, ordered his tribesmen to allow the Taleban entry to Kandahar in 1994. They were ejected in 2001 on his say-so, after which he threw his loyalties behind President Karzai.

Yet Mullah Naqib died in October last year and trouble has been brewing in Arghandab ever since. Rather than listen to the advice of Alokozai elders and appoint Naqib's experienced deputy to lead the tribe, President Karzai took the advice of his half-brother Ahmad Wali Karzai, leader of Kandahar's council, and nominated Naqib's young son to head the tribe in Arghandab.

The Taleban have gained in strength there ever since, setting up their own shadow government of local authorities with the acquiescence, rather than direct support, of Alokozai tribesmen angry at Karzai's interference in their affairs.

On Sunday night local residents first reported that as many as ten villages on the west bank of the Arghandab river had been occupied by the Taleban, who were moving throughout the district in pickup trucks, setting up check points. Pakistani and foreign fighters were said to be among their number.

Several thousand civilians are reportedly on the move from the district, abandoning their fields just ahead of harvest, while at least four plane loads of Afghan troops were flown from Kabul to Kandahar where they have linked up with Canadian forces in preparation to recapture the area.

"Hundreds of Afghan soldiers have been deployed in the region to clear the insurgents from the area," said defence ministry spokesman General Mohammad Zahir Azimi, who claimed that more reinforcements were on their way.

"Once it is started, there will be thousands of Afghan army troops taking part in the operation in Arghandab and elsewhere in Kandahar."

Though unlikely that the Taleban could use Arghandab as a launch pad from which to attack Kandahar, or even resist a concerted attempt to dislodge them, their sudden appearance at the gateway to Kandahar is unlikely to convince the city's 450,000 residents that the Afghan government is consolidating its power in the south of the country, while renewed fighting will do little to promote the efforts of Nato powers in developing the area.

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