NATO's International Security Assistance Force (ISAF) confirmed in a statement that one of its personnel was killed by a man in an Afghan National Army uniform.
The British member of an engineering regiment was killed when the Afghan opened fire on Monday at a base in the Nahr-e Saraj district of the Helmand province in the insurgency-ridden south.
The attack on Monday came as U.S. President Barack Obama prepares to host Afghan President Hamid Karzai at the White House later in the week. The two will hold talks focused on the long-term security contract between both countries.
At least 63 troops from the force were killed in 2012 in a surge of insider attacks that occured whilst U.S.-led soldiers try to train up the local army and police to battle Taliban militants.
"The British soldier was killed when a suspected Afghan soldier opened fire first at Afghan troops and then at British soldiers," said Major Martyn Crighton, a spokesman for ISAF.
"In the subsequent engagement, the attacker was killed by British troops."
An investigation has been launched and ISAF said it was alliance policy for the dead soldier's home nation to issue an identification.
Taliban militants often claim such insider attacks are planned strikes by its supporters, but ISAF and Afghan officials say that many are due to personal grudges.
The threat has become so serious that international soldiers working alongside Afghan security forces are often watched over by so-called "guardian angel" troops on duty to provide protection.
In one incident in November, an ISAF soldier fighting insurgents in the Nad Ali district of Helmand province was shot dead after a "verbal argument" at a joint camp.
Last month, a female police officer killed a U.S. adviser in Kabul's police headquarters -- the first insider attack by a woman.
Scores more Afghans have also been killed in insider attacks, with four policemen killed 10 days ago when a colleague let in attackers as officers slept at a post in the southern province of Uruzgan.
The policeman who aided the attack then fled with the Taliban militants.
There are presently around 100,000 U.S.-led troops fighting alongside Afghan security forces against the Taliban-led insurgency that has been raging since a U.S.-led invasion toppled the Islamist regime in late 2001.
NATO combat forces are scheduled to withdraw from Afghanistan by the end of 2014.
President Karzai's relationship with Washington has been troubled in recent years and the issue of insider attacks could encourage the U.S. to provide less long-term support for Afghanistan, raising the risk of civil war.