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(BBC) Police say that the bomb went off in the Shah Shahid area of the city.
A medic quoted by the Reuters news agency said that injured people including children were rushing to a nearby hospital for treatment.
A security source told Reuters that the target was probably an army compound.
The source said that the number of fatalities was expected to rise. The BBC's Khalil Noori says that the powerful blast damaged shops and houses and that most of the casualties are civilians.
On Thursday at least six people, including three policemen, were killed in a suicide bombing in eastern Afghanistan.
A lorry filled with explosives was detonated outside a police compound in Puli Alam, capital of Logar province.
The Taliban claimed the bombing, the first major attack since the militants confirmed last week that their leader, Mullah Omar, was dead.
On Monday the Afghan Taliban released a video which they said showed members of the group pledging allegiance to the new leader, Mullah Akhtar Mansour. 
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