A Reuters reporter at the palace said the attack began soon after 6.30 a.m. (0200 GMT), when at least one man opened fire with an automatic rifle at a gate to the palace in the central Shash Darak district.

Karzai's whereabouts were not immediately known, though he was due to attend a press event at the palace after 9 a.m. (0430 GMT).

Reporters had been gathering at the palace when the attack began and dived for cover as government forces returned fire. Heavy explosions resounded and the gunfire intensified.

Schoolchildren walking to classes nearby were also caught in the exchanges.

The Taliban claimed responsibility the attack in a text message to Kabul reporters from spokesman Zabihullah Mujahid.

"Today at 6.30 a.m. a number of suicide bombers attacked the presidential palace, defense ministry and the Ariana Hotel," Mujahid said.

The Ariana Hotel is known to house the headquarters of the U.S. Central Intelligence Agency (CIA) in Afghanistan. A thick plume of smoke was seen rising from the building.

An Afghan official told Reuters the attackers had made their way into a nearby building from which they were firing.

Shash Darak includes the most important buildings in Kabul, including the palace, the headquarters of NATO-led forces in Afghanistan, the Afghan Defense Ministry and the CIA's Afghan station.