Members of Afghanistan's National Directorate of Security (NDS) keep watch at the site of the blast. ─ AFP
The attack is the latest to rock Kabul, which is regularly devastated by bomb blasts and militant assaults, often killing many civilians.
The Taliban claim many of the attacks as they step up their bid to drive out foreign forces with a series of assaults across the country.
But the IS group, recently ousted from the Iraqi city of Mosul, have been expanding their footprint in eastern Afghanistan and have claimed responsibility for several devastating attacks in Kabul.
'We will hunt them down'
First emerging in 2015, the group's local affiliate Islamic State Khorasan Province (IS-K), overran large parts of eastern Nangarhar and Kunar provinces, near the Pakistan border, where they engaged in a turf war with the Taliban.
US forces in Afghanistan have repeatedly targeted the group, killing its head Abu Sayed and several senior advisers in a July 11 strike in Kunar, the Pentagon has said.
The decision to deploy the so-called Mother Of All Bombs (MOAB) also targeted IS hideouts in Nangarhar, according to the Afghan defence ministry, though fighting in the area has continued.
Pentagon officials say the group now numbers fewer than 1,000 in Afghanistan.
“We will be relentless in our campaign against ISIS-K. There are no safe havens in Afghanistan,” said General John Nicholson, commander of US forces in Afghanistan, in a statement Sunday confirming some of the deaths in the July 11 strike.
Analysts said Monday's attack in Kabul would be seen as a warning to Baghdad after it pushed the IS out of Mosul. “(IS) wants to send a message to many states, not just to Iraq, to prove that it is present everywhere ... particularly after the victories of the Iraqi security forces in Mosul,” said Issam al-Fili, a professor of Political Sciences at the Al-Mustansiriya University in Baghdad.
“Attacking embassies is part of the strategy of this kind of group because embassies represent a strong symbol for the affected states,” he said, adding that the attack would not have come as a “surprise” to Baghdad.
The attack underscores IS's increasing presence in Afghanistan, which continues to be roiled by insecurity nearly 16 years after the US invasion to topple the Taliban regime.
NATO forces ended their combat mission in Afghanistan at the end of 2014. Since then Afghan troops and police, beset by soaring casualties, have struggled to beat back the Taliban while facing the growing menace of the IS. The US is considering whether to send thousands of more troops to help the beleaguered Afghan forces.