Four gunmen attacked Kabul's landmark Intercontinental Hotel on Saturday and started shooting at guests, officials said, in an assault that is still under way.
"Four attackers are inside the building," an official at the National Directorate of Security (NDS) spy agency told AFP.
They are "shooting at guests", he said.
Another official said the attackers were armed with small weapons and rocket-propelled grenades when they entered the hotel, which often hosts weddings, conferences and political gatherings.
"They are now on the third and fourth floors fighting with our forces. We don't know the details of casualties yet but they set the kitchen on fire," interior ministry spokesman Nasrat Rahimi told AFP.
The fourth floor of the hotel is also on fire, the NDS official said.
Ministry of interior spokesman Najib Danish confirmed that several attackers have entered the hotel.
"We don't know the details yet but our forces are in the area to bring them down," Danish said.
There was no immediate information on casualties in the latest attack on the state-owned 1960s hotel, which is not part of the global InterContinental chain.
Some of the occupants inside the hotel are hiding on the second floor, a security source said.
A guest hiding in his room in the hotel told AFP he could hear gunfire.
"I don't know if the attackers are inside the hotel but I can hear gunfire from somewhere near the first floor," he said without giving his name.
"We are hiding in our rooms.I beg the security forces to rescue us as soon as possible before they reach and kill us."
Electricity was cut after an initial explosion at the hilltop hotel, a counterterrorism source said.
The Intercontinental was last targeted in June 2011 when a suicide attack claimed by the Taliban killed 21 people, including 10 civilians.
Security in Kabul has been tightened since May 31 when a massive truck bomb ripped through the diplomatic quarter, killing some 150 people and wounding around 400 others -- mostly civilians. No group has yet claimed that attack.
The Islamic State group has claimed most of the recent attacks in the Afghan capital, but authorities suspect that the Taliban-affiliated Haqqani Network has been involved in some of the assaults.
The deadliest of the recent attacks happened at a Shiite cultural centre on December 29 when a suicide bomber blew himself up, killing more than 40 people.