The blast comes days after nearly 80 people were killed in a suicide bomb attack at a wedding reception in Afghanistan's Kabul earlier this month.
President Ashraf Ghani had condemned the incident and said, "My top priority for now is to reach out to the families of victims of this barbaric attack." The Islamic State had claimed the responsibility of the attack.
IS said one of its fighters blew himself up at a "large gathering" in Kabul while others "detonated a parked explosives-laden vehicle" when security forces arrived, in a statement posted on the Telegram messaging app.
On Wednesday, Taliban militants killed at least 14 members of a pro-government militia in Afghanistan. The incidents come in the backdrop of Taliban and US officials nearing a deal aimed at ending the 18-year war.