The blast killed at least 12 people, wounded more than 80 and caused extensive damage to the embassy. It shattered the windows of scores of nearby shops, and sent a huge cloud of dark smoke billowing over the diplomatic quarter of the city. The Taleban claimed responsibility for the attack.

Eleven of the dead were ordinary Afghans and the other an Afghan policeman, the Interior Ministry said. No Indians died.

Although the Interior Ministry is in the same street, Nirupama Rao, India's Foreign Secretary, said that the embassy was clearly the target as the suicide bomber drove right up to the concrete blast barriers that protect it.

A similiar attack on the embassy in July last year – the deadliest in Kabul of the eight-year war – killed 60 people and was blamed on Taleban militants linked to Pakistan's intelligence agencies, fuelling tensions between New Delhi and Islamabad.

The Taleban tends to attack the capital early in the day, after smuggling its suicide bombers in overnight; today's explosion occured at 8.30am.

It has been held responsible for other recent attacks on the capital. There have been five since mid-August, including last month's suicide bombing of an Italian military convoy in which six Italian soldiers and ten Afghan civilians died, and the suicide bombing of Nato's headquarters in August in which seven civilians were killed.

Today's bomb left a large crater in the road, and the scene was littered with burnt-out vehicles, body parts and scraps of clothing, including the pale blue burqas that many Afghan women wear.

Television reports showed Afghan civilians and soldiers pulling a charred, severed leg out of a destroyed vehicle, and others carrying an apparently lifeless body on a stretcher to an ambulance. On another stretcher, a man lay face down, one arm hanging downward, his back left leg covered in blood.

Jayant Prasad, the Indian Ambassador, said that the embassy had suffered extensive damage despite its protective blast walls, with doors and windows blown out. Three Indian guards in a watchtower were injured by shrapnel. An armoured United Nations Land Cruiser was damaged, but the driver survived unharmed.

One young man called Najibullah said he had just opened his shop when the bomb exploded, knocking him unconscious. When he came round he could see nothing. "Dust was everywhere, people were shouting," he said. You couldn't see their faces because there was so much dust."

Another man, Mohammad Arif, said that the bomb went off as he was leaving the Indian Embassy and hurled him against a concrete barrier. Blood oozed from a wound on the left side of his head.

Mohammad Osman Shapor, a government employee who was on his way to work, said from his hospital bed: "The explosion threw me off my bicycle and I was unconscious."

Hamid Karzai, Afghanistan's President, called the perpetrators "barbaric" and said: "This is a terrorist attack, and an obvious attack on defenceless Afghan civilians."