Casualties are feared, police told AFP news agency.
Najib Danish, spokesman for the Ministry of Interior, told Al Jazeera that the explosion happened close to a compound of British security contractor group G4S, near an industrial park on the main road leading out of Kabul towards eastern Afghanistan.
Danish said there was also gunfire in the area. He added that there was no word on the number of casualties.
No one immediately claimed responsibility for the attack.
The explosion came only hours after Afghan President Ashraf Ghani told a UN-sponsored conference in Geneva of plans to seek a peace agreement with the Taliban.
Separately, at least 30 civilians were killed, along with 16 Taliban fighters, by government forces battling the fighters in Helmand province overnight.