The family of Sydney resident Sayed Habib have told the Guardian Australia his body was found on Tuesday with signs he was tortured before being killed.
They say militants captured him earlier in September while he was visiting relatives in southern Afghanistan.
The Department of Foreign Affairs and Trade is providing his family with consular assistance.
"The Australian Embassy in Kabul continues to seek to confirm reports an Australian-Afghan dual national has been killed in Afghanistan," a department spokesman told AAP.
"The area where these events reportedly occurred is contested by the Taliban and it will be difficult to obtain definitive and official confirmation of the man's death from the Afghanistan government."
Afghanistan remains listed as a "do not travel" destination under Australian government advice to travellers.
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