"Civilians are being evacuated" from the area as the attack is ongoing, said the official, who declined to be named. There was no immediate information about any casualties.
Afghan forces retake district in southern province of Helmand
At least four explosions, along with the sounds of gunfire and grenades were heard by AFP reporters and residents near the city's diplomatic quarter shortly after 11:00 am (0630 GMT).
Security forces rapidly descended on the area, as the squeal of ambulance sirens rushing to the scene could also be heard. A column of smoke rose into the air from the blast site. Police confirmed at least one blast had taken place, but said they did not immediately have further information.
The Iraqi embassy is located in northwestern Kabul, in a neighbourhood that is home to several hotels and banks as well as large supermarkets and several police compounds.
The attack is the latest to rock Kabul, and comes as the resurgent
Taliban ramp up their offensive across the country during the warmer weather fighting season. A week ago, a car bomb struck the city during morning rush hour, killing at least 26 people.
Afghanistan unyielding on border fencing
A recent UN report showed that nearly 20 per cent of all civilian deaths in Afghanistan in the first half of 2017 took place in Kabul.
Many of those deaths happened in a single attack in late May when a truck bomb exploded during the morning rush hour, killing more than 150 people and injuring hundreds.
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