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A British female aid worker kidnapped in eastern Afghanistan a fortnight ago was killed by her captors during a botched attempt to rescue her, British Foreign Secretary William Hague said on Saturday.

Hague expressed "deep sadness" at the death of Linda Norgrove, 36, but defended the rescue bid, insisting that Britain and its NATO forces had judged it her "best chance" of surviving the ordeal.

The raid was carried out on Friday night by US troops acting as part of an international operation, a British government source told AFP.

US development group DAI, who had employed Norgrove as regional director for a US-funded aid project in the eastern town of Jalalabad since February, said it was "saddened beyond words" at her death.

Three local DAI staff were seized with her on September 26 in nearby Kunar province, a hotbed of Taliban activity near the Pakistan border, but Western aid sources in Afghanistan said they were released a week after the attack.

"It is with deep sadness that I must confirm that Linda Norgrove, the British aid worker who had been held hostage in eastern Afghanistan since 26 September, was killed at the hands of her captors in the course of a rescue attempt last night (Friday)," Hague said in a statement.

According to an Afghan intelligence official, the rescue team was closing in on the house where Norgrove was being held when her captors threw a grenade into the room where she was kept, killing her.

The troops opened fire and killed all the captors, the official told AFP on condition of anonymity.

"Responsibility for this tragic outcome rests squarely with the hostage takers," Hague said.

"From the moment they took her, her life was under grave threat. Given who held her, and the danger she was in, we judged that Linda?s best chance lay in attempting to rescue her."

He thanked Britain's NATO allies and the Afghan authorities and security forces for their help, adding: "Hostage-taking is never justified and the UK does not make concessions to hostage-takers

"But whenever British nationals are kidnapped, we and our allies will do everything in our power to free them."

Norgrove's death comes just weeks after British doctor Karen Woo was shot dead in northeastern Afghanistan alongside seven other foreign aid workers.

Last year, British commandos rescued a British-Irish journalist Stephen Farrell in a dramatic airborne operation in Kunduz, but his Afghan colleague Sultan Munadi was killed in the ensuing firefight.

General David Petraeus, who commands US and NATO troops fighting the Taliban in Afghanistan, said: "Afghan and coalition security forces did everything in their power to rescue Linda."

US forces form the bulk of about 150,000 international troops fighting insurgents in Afghanistan following the 2001 invasion, while Britain has about 10,000 soldiers there.

Norgrove was an experienced aid worker, having worked in Afghanistan for several years with the United Nations before joining DAI this year.

The president of the aid group, James Boomgard, said her death was "devastating news" and offered his condolences to her parents, John and Lorna, and her younger sister Sofie, for their "terrible loss".

"We are saddened beyond words by the death of a wonderful woman whose sole purpose in Afghanistan was to do good," he said.

Norgrove was born in Scotland and travelled widely, studying in the United States, Mexico and Uganda before taking her first development job with the World Wildlife Fund in Peru.

She worked with the UN in Kabul for three years, where she learned Dari, and after a two-year stint in Laos, returned to Afghanistan in February.

A Taliban spokesman told AFP at the time that they did not know about her abduction, but it is not uncommon for them to deny responsibility in the early stages for operational reasons.

AFP