The Vehicle-borne Improvised Explosive Device (VBIED) explosion which took place at around 9.55 p.m. on Monday night, targeted Green Village compound, a residential area for foreign nationals and offices, TOLO News quoted Ministry spokesman Nusrat Rahimi as saying.
He said that a fuel station in the area also caught fire in the explosion.
Rahimi said that five attackers were involved in the attack who were killed after Special Forces entered the area.
At least 400 foreign nationals were rescued from the area by police, he added.
The blast was huge enough to be heard in across the city.
Meanwhile, the Taliban has claimed responsibility for the attack, Khaama Press reported.
Taliban spokesman Zabiullah Mujahid said in a statement that one of the suicide bombers of the group detonated the VBIED close to the Green Village.
Mujahid went on to claim that many other assailants stormed into the compound following the explosion.
But Rahimi has rejected the Taliban claim, writing on social media that "the enemies' claim that gunmen entered the Green Village complex is untrue".
The Green Village compound was earlier targeted by a truck bomb explosion in January this year in which four people were killed and 90 others wounded.
Monday's explosion came hours after Afghan President Mohammad Ashraf Ghani met visiting US Special Representative for Afghan Reconciliation Zalmay Khalilzad earlier on Monday, where the two discussed the latest round of negotiations between Taliban representatives and an American delegation in Qatar.
( With inputs from IANS )