The suicide attack occurred Saturday morning on a crowded Afghan National Army bus. An Interior Minister spokesman said the bomber was dressed in an army uniform and boarded the bus before detonating his explosives.
The blast blew the bus to pieces, killing at least 27 people, most of them Afghan soldiers, and wounding at least 21. Several civilians were among the dead and wounded, and nearby shops were badly damaged.
Zemarai Bashary, a spokesman for Afghanistan's Interior Ministry, says officials thought security in the Afghan capital was good, but an attack by a bomber wearing an army uniform is a new phenomenon.
"These are the enemies of Afghanistan, these are the enemies of the peace and stability and prosperity and development of Afghanistan. Whoever they are, they are terrorists. They are breeding terror and fear inside the people," said Bashary.
Bashary declined to say who was suspected of carrying out the attack, but a purported Taleban spokesman said the Taleban was responsible.
Attacks inside the Afghan capital had been rare, but this year there have been several. In June a police academy bus in Kabul was bombed, killing 35 people. That was the deadliest bombing in Afghanistan since the U.S.-led overthrow of the Taleban government in 2001.
Suicide bombings are on the rise in general in Afghanistan. There have already been more than 100 this year, compared with only 17 in 2005.
U.S. officials say the Taleban have resorted to terror tactics out of desperation as coalition forces have stepped up operations against them.
Taleban militants abducted four Red Cross employees Wednesday as they were trying to negotiate the release of a German hostage held by the insurgents since July. The kidnappers have already executed a second German hostage.
Afghan and U.S.-led coalition forces say they killed 169 Taleban insurgents earlier this week after coming under attack during combat patrols in the south. One coalition soldier was reported killed during the battles.