"I have seen four people dead and at least eight others injured lying on the ground," a witness at the site who declined to be identified said.
A Xinhua reporter at the blast site also saw at least five dead bodies and several injured who were taken to hospital.
The blast occurred close to a compound of intelligence agency and the interior ministry building.
The bomb targeted a government department in Kabul's New City, a crowded business centre, an official said requesting anonymity.
Interior Ministry's spokesperson Sediq Sediqi confirmed the incident but said it was too early to provide details.
In a separate incident, a Taliban commander was killed Tuesday night in the country's Uruzgan province as security forces raided a militant hideout, an official said Wednesday.
The commander's death is a major setback to the Taliban militants, a police spokesperson said, adding that the militant was active in Chora district and adjoin areas. The province is 370 km from capital city of Kabul.
"Acting upon intelligence report, the security forces on Tuesday night stormed a house in Chora district where commander Mullah Zainullah was present and killed him on the spot," spokesperson Farid Ayel said.