At a US military hearing on Wednesday Staff Sgt Robert Bales, 39, admitted killing 16 civilians in March 2012.
A jury will decide in August whether he is sentenced to life with or without the possibility of parole.
The villagers in Kandahar province argue that he has been treated far too leniently and should be hanged.
Most of the victims were women or children, and many of them were shot in the head. Some of the bodies were piled up and burnt.
Friends and family members of those killed say they were stunned to learn that he has escaped capital punishment.
"It is our firm demand that Afghanistan, the US and the international community condemn this American to death. He martyred our family members... and went back with his body full of blood of his victims to his camp," bereaved villager Mullah Baran told the BBC.
Another villager, Haji Baqi, whose brother was killed by Bales, said: "We want him to be hanged. The international community should not ignore our grief."
Defence lawyers have said Bales is contrite about the killings, and described him as "crazed" and "broken" on the night of the attack.
At the time, he was serving his fourth tour of duty and had been drinking alcohol and snorting Valium.
In addition to the 16 murdered, six Afghans were injured.
A military judge on Wednesday accepted a US soldier's guilty plea to killing 16 Afghan villagers and ruled that he would not face the death penalty.
"In accordance with your plea of guilty this court martial finds you .. guilty of all remaining charges," said judge Colonel Jeffery Nance, setting the maximum punishment at life behind bars without eligibility for parole.
A US soldier charged in a shooting spree in which 16 Afghan civilians were killed pleaded guilty to the slayings Wednesday in a military court.
Staff Sergeant Robert Bales faced 16 murder charges and six attempted murder charges in the March 2012 shootings. In chilling testimony following his plea, he detailed each of the 16 murders, and said there was no legal justification for them.
"I observed a female I now know to be Palwasha," Bales told the judge, according to the Seattle Times newspaper. "I formed the intent to kill Palwasha, and then I did kill her by shooting her with a firearm and burning her. This act, again sir, was without legal justification."
When the judge, Colonel Jeffery Nance, asked Bales why he killed his victims, he replied: "As far as why, I have asked that question a million times since then, and there is not a good reason in this world for why I did the horrible things that I did."
If his guilty plea is accepted, Bales would face life in prison, avoiding the death penalty sought by Army prosecutors in the court martial at Joint Base Lewis-McChord in the US state of Washington.
He pleaded not guilty to another charge of attempting to impede an investigation, the newspaper said.
Bales allegedly slipped away from his military base before dawn on March 11, 2012, and entered homes in a nearby village in the Panjwai district of Kandahar province in southern Afghanistan and shot the civilians, many of whom were sleeping.
Nine children were among the dead, and 11 victims were from one family.
The killings heaped tinder on an already smouldering flame of resentment against the United States among the people and government of Afghanistan.
Voice of Russia, AFP, DPA, BBC