KABUL: Afghan forces exchanged gunfire on Wednesday with attackers who set off a car bomb and burst into the compound of an international aid group in Kabul, the latest brazen assault by Taliban insurgents even as they hold peace talks.

At least two dozen people were injured in the violence engulfing an office of non-profit Counterpart International, which is largely funded by the US government, but it was not immediately clear if foreigners were among them.

Interior ministry spokesman Nasrat Rahimi said the attackers were still putting up resistance from a building where they had holed up, although hundreds of people, including group employees who had been trapped inside, were rescued.

"Two floors of the building have been cleared and to avoid civilian casualties, the operation is being undertaken with caution," he added.

Several loud explosions and bursts of gunfire rocked the area after it was surrounded by special forces, backed by advisers from foreign forces, trying to flush out the attackers.

Authorities cordoned off the site in the capital's upscale Shahr Naw area, dispatching ambulances and police trucks.

"My family is stuck in our house close to the site and they are terrified," said a government employee, Naqibullah.

Amanullah Rahim, an eyewitness, said, "I was in my shop when I heard a huge explosion that shattered all the windows and damaged everything. I ran away and thank God I am not hurt."

At least nine injured people were taken to hospital, said a health ministry spokesman, Wahidullah Mayar, while officials at the city's Emergency Hospital said they had received 15 wounded.

Officials of Counterpart, which has operated in Afghanistan since 2005, were not immediately available to comment.

Taliban militants claimed responsibility for the attack on the third day of the Muslim holy month of Ramadan, with a spokesman, Zabihullah Mujahid, calling the group a US network involved in harmful Western activities in Afghanistan.

The attack could undermine the sixth round of peace talks between US and Taliban representatives in Qatar seeking negotiations to end the nearly 18-year-long conflict.

It comes after the Taliban refused an offer by President Ashraf Ghani for a ceasefire from the first day of Ramadan.

"The Taliban must respond positively to the peace demand of the Afghan people, otherwise, they will be suppressed by our heroic and brave security forces," Ghani said in a statement condemning Wednesday's attack as un-Islamic.

US Ambassador to Kabul John Bass also condemned the attack, saying the aid group helped local communities, trained journalists and supported the Afghan people.

Taliban spokesman Mujahid said the aid group worked closely with government departments promoting women, an effort opposed by the hardline Islamist group.

Before being toppled by US and Afghan forces in late 2001, Afghanistan's harsh Taliban regime barred women from working outside their homes and required them to be accompanied by a male relative.

Despite stepping up security around Kabul, Afghan authorities have failed to deter deadly attacks that have undermined confidence in the government.

Just over two weeks ago, gunmen targeted the communications ministry in Kabul, killing at least seven people in an attack claimed by Islamic State.