A US embassy employee talking to a media confirmed the blast but had no details.
A plume of smoke was seen near the location of the explosion, according to witnesses.
No casualties have been reported.
Inside the embassy, according to the AP, employees heard this message over the loudspeaker: “An explosion caused by a rocket has occurred on compound.”
The explosion, which occurred on the anniversary of the 9/11 attacks, would be the first major attack in the Afghan capital since President Donald Trump abruptly called off US-Taliban talks on the brink of an apparent deal to end America’s longest war lasting almost 20 years.
US and Taliban officials last week agreed on a draft deal that could have led to a withdrawal of troops from Afghanistan, according to Al Jazeera.
The talks between the US and the Taliban were aimed at finally ending the war, which started in 2001 after the US invaded Afghanistan following the September 11 attacks.