The suicide attack took place in the heavily fortified diplomatic area of central Kabul at about 8.30am (5.30am Irish time).
A statement from the president's office said most of those killed and injured were local residents.
Indian Foreign Minister Nirupama Rao said she believed that the embassy was the target of a suicide attack.
She added that most of the embassy staff had escaped injury.
The Indian embassy was hit by a bomb in July last year with the loss of 60 lives in an attack blamed on Taliban militants linked to Pakistan's intelligence agencies.
There was no immediate claim of responsibility for today's attack but the blast bore all the hallmarks of a Taliban-style suicide attack.
It is the fourth blast to hit the capital since mid-August.
