Canada's military is taking back Afghanistan one town at a time and has finally managed to create a pocket of peace in the former Taliban stronghold of Panjwaii.

The routing of insurgents from there, led by Canadian troops, has been the largest offensive of NATO's involvement in Afghanistan.

"Two months ago, driving into Panjwaii without the military's protection would be unheard of," CTV's Steve Chao reported Sunday from Panjwaii. "Today, we're greeted by smiling children."

The bazaar in Panjwaii is returning to life. Shopkeepers say business is getting better because people are buying things again.

Like many from his community, Agha Lali, Panjwaii's leader, fled when Taliban fighters moved into the town, which is 30 kilometres west of Kandahar city.

Now he's back to help secure the fragile peace by meeting with tribal elders to convince them to stop supporting the Taliban.

Before, there were more than a thousand Taliban here," Lali said. "But everyone now is talking about how strong NATO and the Canadians are. We have some peace now. In Panjwaii, people have turned their backs on the Taliban."

He's distributing hundreds of thousands of dollars from Afghanistan's national government to compensate families of civilians mistakenly killed in NATO bombings.

The town bears visible reminders of violence, such as a shop burned out by a suicide bomber. Refugees from fighting in nearby areas ask for help. 

"We need food, we need jobs -- we are castaways in our own land," one told CTV News.

"But for the most part, there is a growing mood of optimism and talk of a lasting calm in a community that for generations has only known war," Chao said.

Battles continue in southern Afghanistan

Skirmishes and pitched battles continue on a daily basis elsewhere in Afghanistan, evidence of how precarious the peace is.

Although Panjwaii is secure for the time being, attacks occur almost daily in the southern provinces once held by the Taliban.

A NATO soldier and more than 50 insurgents were killed Sunday in four different attacks near the Tirin Kot district of Uruzgan province in southern Afghanistan. The soldier's nationality has not been released.

A suicide bomb attack at a restaurant in the Urgun district of southeast Paktika province on Sunday also killed 15 Afghans and wounded 24.

It's believed that the bomber, a Pakistani, was targeting an Afghan special forces commander and a district chief who were at the restaurant. Both were injured in the attack.

NATO figures show that as of mid-November, 217 people have been killed in 97 suicide attacks.

Afghan army and NATO soldiers came under Taliban fire in the Panjwayi district of Kandahar on Saturday, injuring four NATO soldiers. NATO ordered a retaliatory air strike that killed about five insurgents.

And in Zabul province next door, about 50 insurgents launched an attack on the Arghandab district chief's compound Saturday. They fought with police for an hour. One Taliban died and three were wounded, district chief Fazal Bari told The Associated Press. There were no police casualties, he said.

Insurgents also ambushed a police convoy Saturday night on the main Kabul-Kandahar highway in Zabul province. In an exchange of gunfire with police, one insurgent was killed.

With a report from CTV's Steve Chao and files from The Associated Press