At least 28 people were killed and more than 300 wounded when a suicide bomber blew up a bus full of explosives near a government security building in the heart of Kabul.
After the intial blast, which was described as huge by witnesses, armed men and more suicide bombers stormed the heavily-guarded compound, police said.
Al Jazeera's Qais Azimy, reporting from Kabul, said Tuesday's attack, which was quickly claimed by the Taliban, was likely the biggest such incident to hit the capital since 2001.
With the attack happening during morning rush-hour in a crowded area, the number of deaths was likely to rise, according to police.
"Our sources are telling us that at the time of explosion there was a graduation ceremony going on for new recruits when the suicide bomber detonated himself," Azimy said.
|The Taliban's resurgence has raised serious questions about Afghan forces' capacity to hold their own [Omar Sobhani/Reuters]
The security agency attacked is responsible for protecting government ministers and VIPs.
A police spokesman, Basir Mujahid, told Al Jazeera that the gunfight was ongoing, as Afghan special forces rushed to the scene.
"The Taliban are still fighting with the security forces," Mujahid said.
In a statement, the Presidential Palace condemned the attack "in the strongest possible terms".
"The explosion has caused a lot of damage to the government," Zabihullah Mujahid, a Taliban spokesman, told Al Jazeera.
The US embassy said it was not affected by the blast. The NATO military coalition also said it was unaffected.
The Taliban last week announced the start of their "spring offensive" even as the government in Kabul tried to talk them back to the negotiating table in a bid to end the country's drawn-out conflict.
In a statement, the group warned it would "employ large-scale attacks on enemy positions across the country", dubbing the offensive Operation Omari after the movement's late founder Mullah Omar.
Since then, fighting has raged around the symbolically-important northern city of Kunduz, which fell briefly to the Taliban last September.
|Many of those wounded are in serious condition according to hospital officials [Rahmat Gul/AP]
The annual spring offensive normally marks the start of what is referred to as fighting season, though this past winter the usual lull was shorter as the group continued to battle government forces, though with less intensity.
Peace talks that began last summer were abruptly stopped after it was revealed that Taliban leader Mullah Omar had been dead for two years, a disclosure which sparked infighting in Taliban ranks.
With additional reporting by Shereena Qazi
Source: Al Jazeera and agencies