The Taliban launched an attack on the centre of the Afghan capital on Tuesday, hitting Nato's coalition force headquarters next to the US embassy in Kabul.
The insurgent group said the ongoing assault began with a suicide attack targeting local and foreign intelligence in the capital.
Reporters heard a string of loud blasts while police confirmed one explosion and a gunfight close to the heavily-guarded embassy compound.
"Today at one o'clock at Kabul's Abdul Haq roundabout a massive suicide attack on local and foreign intelligence facilities is ongoing," said a spokesman for the insurgent group, Zabiullah Mujahid.
A Western military source said Nato's International Security Assistance Force headquarters was one of the targets.
"ISAF HQ is under attack at the moment," the source said.
An ISAF spokesman would not confirm the headquarters was a target but said: "There is an ongoing attack in the centre of Kabul."
One eyewitness reported that attackers had taken up position in a tall building under construction and were exchanging fire with security forces. An Afghan National Army installation is nearby, as is a Marriott hotel building site, the witness said.
The US Embassy did not immediately have further information.
The Taliban are leading a bloody 10-year insurgency in Afghanistan. There are around 140,000 foreign troops in the country.