The area where the explosion took place is close to the presidential palace and several foreign embassies.
External Affairs Minister Sushma Swaraj tweeted that Indian officials are safe.
Prime Minister Narendra Modi, condemning the massive attack, tweeted, "India stands with Afghanistan in fighting all types of terrorism. Forces supporting terrorism need to be defeated."
By God's grace, Indian Embassy staff are safe in the massive #Kabul blast.- Sushma Swaraj (@SushmaSwaraj) May 31, 2017
Thick smoke could be seen rising from the centre of the city but it is not clear what the target was.
Houses hundreds of metres away from the blast were damaged with windows and doors blown off their hinges.
There was no immediate claim of responsibility, but the attack came as the resurgent Taliban are stepping up their annual "spring offensive".
The ISIS group has also claimed responsibility for several recent bombings in the Afghan capital, including a powerful blast targeting an armoured NATO convoy that killed at least eight people and wounded 28 on May 3.
The blast was the latest in a long line of attacks in the Afghan capital. Kabul province had the highest number of casualties in the first three months of 2017 because of multiple attacks in the city.