The blast occurred near the interior ministry office and the Indian embassy.
Officials said it was a suicide attack. Eyewitnesses reported glass and debris scattered in the street and a plume of smoke rising above the area.
Kabul has witnessed a number of attacks in recent months. Last month six Italian soldiers were killed in a bomb attack on a military convoy.
Most of the attacks have targeted international forces or government offices - but Afghan civilians are invariably killed as well.
The latest blast hit at 0827 local time (0353 GMT), as residents were arriving to work.
Television pictures showed charred vehicles at the site and ambulances speeding to the location.
An eyewitness, Habib Jan, told the BBC the victims were civilians.
"A [Toyota] Corolla car was parked in front of the Indian embassy. It was rush hour, about 10 minutes after I arrived at the office when we heard an explosion.
"There were lots of workers cleaning the street - most of them have been killed."
Nirupama Rao, India's foreign secretary told reporters, she believed "the suicide bomb was directed against the Indian embassy".
Three Indian paramilitary troops guarding the embassy received minor shrapnel injuries, she said.
"I was busy working when the blast happened. The windows were shattered, I ran into my tent," a worker at a nearby construction site said.
This is thought to be the fourth bomb attack in Kabul since August. Correspondents say insurgents are increasingly targeting the capital because of the publicity it attracts.
In July 2008 a suicide bomber has rammed a car full of explosives into the gates of the Indian embassy in Kabul, killing 41 people and injuring 141.
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