Gunfire followed the attack on the Posh Hotel, the only venue with a discotheque in the capital, a Reuters witness said.
Witnesses said the whole district was cordoned off by police, and that sporadic gunfire could still be heard.
"So far, we can confirm that nine people - mostly women who were hotel staff - have died," said Mohamed Hussein, another police officer.
Hussein told Reuters the suicide attacker rammed the explosive-laden car laden into the hotel's entrance. Another police officer said gunmen had stormed a restaurant adjacent to the hotel in central Mogadishu.
Al Shabaab, which has carried out a campaign of suicide bombings in its bid to topple the Somali government and impose its strict interpretation of Islam, claimed responsibility.
Since losing large swathes of territory to African Union peacekeepers supporting the government, the group has frequently launched raids and deadly attacks in Mogadishu and other regions controlled by the federal government.
The Horn of Africa country has been racked by armed conflict since 1991, when clan-based warlords overthrew dictator Siad Barre and then turned on each other.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)