The explosion came as a senior U.S. diplomat was visiting Kabul to brief Afghan President Ashraf Ghani on a draft peace accord reached with the insurgents that could see thousands of U.S. troops withdrawn from Afghanistan.
The blast hit close to Green Village, a large compound used by staff of international organisations, sending a column of smoke and flame into the sky.
It was followed by a second, smaller explosion that occurred as generators inside the compound blew up.
The Taliban’s main spokesman, Zabihullah Mujahid, said the attack had targeted foreign forces. He said a car bomber had blown himself up and multiple attackers had stormed the compound.
Interior Ministry spokesman Nasrat Rahimi said five civilians were killed in the blast and 50 wounded.
The blast took place as Zalmay Khalilzad, the special U.S. envoy for peace in Afghanistan, was conducting a television interview, giving the outlines of an accord which would see almost 5,000 American troops withdrawn from Afghanistan in the coming months.
In exchange, the Taliban would agree not to allow Afghanistan to be used as a base for attacks on the United States and its allies by militant groups including Al Qaeda and ISIS.