Suicide bombers and gunmen launched a seven-hour attack on the headquarters of the Kabul traffic police on Monday, local officials said, the second coordinated attack on a government building in less than a week.
The Taliban claimed responsibility for the assault, which raised the possibility that insurgents are focusing on testing Afghan security forces in Kabul after a series of high-profile attacks on Western targets last year.
Violence across the country has been increasing over the past year, sparking concern about how the 350,000-strong Afghan security forces will be able to manage once foreign troops withdraw by the end of 2014.
"It's very clear the more and more the Afghan security sources are getting into the lead, the more they are targeted by the insurgents," said Brigadier General Gunter Katz, spokesman for the NATO-led International Security Assistance Force (ISAF).
Three traffic police were killed and four wounded in the raid, which is ongoing and began around 6 am local time (0230 GMT) when two bombers detonated explosives, Deputy Interior Minister General Abdul Rahman told Reuters.
"Three terrorists have been killed, two others are holed up in a room, they may blow themselves up any minute," he added.
The two remaining attackers were armed with automatic rifles and stormed the building, which is nestled between two police hubs, and close to parliament and an adjoining road frequented by Afghan lawmakers.
Thick black smoke rose from the besieged compound as an Afghan Army helicopter hovered above the site where insurgents and security forces engaged in a fierce firefight.
"Honestly speaking, this type of attack, at the start of the year, indicates the coming months are going to be tough," a government official said, speaking on condition of anonymity.
"The Taliban will want to display their presence and reach with these kinds of attacks in Kabul."
Last week, a band of six suicide bombers attacked the National Directorate of Security (NDS), killing two of its guards. That attack followed a failed assassination attempt on NDS chief Asadullah Khalid.