At least 14 people were killed and eight others wounded, said Sediq Seddiqi, spokesman for Afghanistan's Interior Ministry.
The majority of the victims were citizens of Nepal, he added.
The Canadian embassy confirmed that the victims worked for a security company that provided services to the Canadian Embassy, the embassy said in a tweet on its official Twitter account.
"Our thoughts with families and friends of victims," the tweet said.
The embassy also confirmed in a followup message that there was no attack targeting the compound itself.
Claim of responsibility
The Taliban claimed responsibility for the attack in a text message sent to media organizations.
"This attack is an act of terror & intimidation," wrote Afghanistan's Chief Executive Abdullah Abdullah, in a message posted on Twitter.
Hundreds of Nepalese security guards provide protection at diplomatic compounds like the sprawling, heavily-fortified U.S. Embassy in Kabul.
An embassy spokesperson said the victims of Monday's attack were not tasked with guarding the U.S. Embassy.
A rash of kidnappings and Taliban bombings have heightened security fears in Kabul. U.S. and other diplomats are barred from traveling by road the short distance from the city's international airport to their diplomatic missions. Instead, they are ferried by helicopter.
Meanwhile, the fourteen-year war against the Taliban in the country side is as bloody as ever.
After a large surge in forces during the first years of the Obama administration, the U.S. has reduced its military deployment in Afghanistan to around 9,800 troops.
Washington plans to further reduce that deployment to approximately 5,500 troops by the end of this year, marking the smallest military presence since a U.S.-led bombing campaign helped overthrow the Taliban in 2001.
Later on Monday, Afghan officials reported a deadly blast in a market place in the northeastern province of Badakshan.
At least eight civilians were killed and thirty others wounded, said Ahmad Naweed Froutan, spokesman for the provincial government.
The attack took place during the busiest shopping day of the week in the main bazaar of the town of Kishm, Froutan added.
So far there has been no claim of responsibility for the second bombing.