The "counter-terrorism operation" on Saturday morning targeted hideouts of terrorists in the remote hilltop area of Katlang in Mardan district, the provincial government said in a press note.
It confirmed the civilian casualties and suggested that women and children might be among the victims. Later, official reports said 12 terrorists were killed during the operation.
The press note, issued on Saturday, said the operation was based on "credible intelligence" about armed militants using the location as a hideout and transit point. It said "several high-value targets linked to ongoing militant activities in the region" were killed in the operation.
"Unfortunately, subsequent reports have confirmed the presence of non-combatants, including women and children, at the periphery of the target zone, resulting in tragic civilian casualties," the press note stated.
Chief Minister of Khyber Pakhtunkhwa Province, Ali Amin Gandapur, said the death of civilians during the operation was highly condemnable and tragic.
Terming it an "immensely painful and regrettable development", the press note said every effort is made to avoid "collateral damage". "However, the complex terrain, the deliberate tactics of militants to embed within civilian populations, and the fog of war can sometimes lead to unintended consequences," it added.
Authorities made the admission Saturday evening about the deaths, which occurred in the early hours of that morning in a remote hilltop area of Katlang, Khyber Pakhtunkhwa province.
It is rare for Pakistan to reveal civilian casualties resulting from anti-militant activities and it was not immediately clear how the Saturday operations were carried out.
According to provincial government spokesman Muhammad Ali Saif, reports indicated the location was being used as a "hideout and transit point for terrorist" elements. Subsequent information revealed that some unarmed civilians were present in the vicinity of the site, Saif added.
Locals said 10 bodies, including those of women and children, were recovered from the area where government officials claimed the anti-militant operation had taken place.
They belonged to the Swat region and were nomads with livestock in the Shamozai mountains, the locals added. Their families protested the deaths by placing the bodies on the Swat Highway.
The loss of unarmed individuals was deeply regrettable and the tragic incident occurred as a consequence of targeting terrorists, said spokesman Saif.
"The safety of civilians is always a top priority during such operations. However, due to complex geography, terrorists using civilian populations as cover, and the urgent nature of the operation, unintended consequences can sometimes occur."
Immediate medical assistance was being provided to the injured and compensation for the families of the deceased was being ensured, he added.
A statement from the provincial government said the operation "successfully neutralized several high-value targets" linked to ongoing militant activities in the region. It also said, "the fog of war can sometimes lead to unintended consequences."