The spike in so-called green-on-blue attacks is causing growing concern in the United States and among its NATO allies fighting a Taliban insurgency in Afghanistan.
"An International Security Assistance Force service member died when an individual wearing an Afghan Uniformed Police uniform turned his weapon against ISAF service members in southern Afghanistan today," ISAF said.
Afghan and ISAF officials were investigating the incident, a statement said without giving further details or specifying the soldier's nationality.
NATO does not disclose the number of wounded in any attacks, but a provincial official said another soldier and an interpreter were injured and that the shooter was killed by return fire.
The incident took place in the police headquarters of Spin Boldak district of Kandahar province, provincial government spokesman Jaweed Faisal told AFP.
Kandahar chief of police General Abdul Razik said the shooting happened after an argument.
The latest death takes the toll among international coalition soldiers from insider attacks to 10 in less than two weeks, sharply eroding trust between foreign troops and the Afghans they work with.
Two American soldiers were killed in an incident on Friday, a week after six were killed in a single day on August 10. Another NATO soldier was killed three days earlier.
The total green-on-blue toll makes up 13 percent of all international coalition deaths this year, according to figures from NATO and a tally of total deaths kept by the icasualties.org website.
Some of the attacks are claimed by the Taliban, who say they have infiltrated the ranks of Afghan security forces, but many are attributed to cultural differences and antagonism between local and US-led allied forces.
In a sign of US concern, Pentagon chief Leon Panetta called Afghan President Hamid Karzai on Saturday, urging him to crack down on the incidents.
The pair "agreed that American and Afghan officials should work even more closely together to minimise the potential for insider attacks in the future", the Pentagon said.
Measures should include improved intelligence and more rigorous vetting of Afghan recruits, a statement said.
NATO has some 130,000 troops in Afghanistan who are due to pull out in 2014 and are spending increasing amounts of time working alongside and training Afghan forces who will take over when they leave.
But the growing number of insider attacks is likely to add to pressure in NATO nations for an exit as soon as possible from the increasingly unpopular war, now nearly 11 years old.
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