The British company and police both said the blast was a car bomb targeting the compound, which houses G4S, a private British security company, in east Kabul. G4S provides security for the UK Foreign Office in Kabul.
"We can confirm that there has been an incident at one of our locations in Kabul. The situation is ongoing and we are coordinating with the Afghan authorities to bring it to a conclusion," G4S tweeted from its official account.
An Afghan Interior Ministry official said an unknown number of gunmen had entered the compound after the bomb exploded near the facility and were battling security forces. Earlier, sources said the blast was followed by gunfire.
A Health Ministry spokesman confirmed the casualties.
The Taliban militant group has claimed responsibility for the deadly assault.
Wednesday's assault on G4S is the second high-profile attack claimed by the Taliban on US-led forces in as many days. On Tuesday, three US soldiers were killed in a blast near Ghazni city in central Afghanistan that was claimed by the militant group.
Last week, more than 50 people were killed and over 80 wounded after a huge explosion ripped through a building in Afghanistan's capital, in which a large crowd of people, including religious scholars, were marking the birthday anniversary of Prophet Mohammad (PBUH).
The Kabul attack came just hours after Afghan President Ashraf Ghani announced the formation of a team for prospective peace talks with the Taliban. At an international conference on Afghanistan in Geneva, Ghani said the 12-person negotiating team includes both men and women and will be led by his chief of staff Abdul Salam Rahimi.
Rahimi, a former humanitarian worker and ex-deputy Afghan finance minister, is considered one of Ghani's closest aides.
At the request of the US, a Taliban office was established in Doha in 2013 to facilitate peace talks. In recent months, Taliban representatives and US envoy Zalmay Khalilzad have already discussed the Taliban's conditions to end the 17-year war in Afghanistan.
Last year, US President Donald Trump increased the number of US forces in the country as part of what he called a new strategy against the Taliban. There are now about 14,000 US soldiers in the country. The Taliban have previously said the presence of foreign troops was the biggest obstacle to peace in Afghanistan.
Afghanistan has been gripped by insecurity since the US and its allies invaded the country as part of Washington’s so-called war on terror in 2001. Many parts of the country remain plagued by militancy despite the presence of foreign troops.
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