The blast was the second major suicide attack in Kabul this month, underscoring the rising danger in the once-calm capital as militants step up attacks across the country.
The Interior Ministry spokesman, Zemeri Bashary, said 12 people were killed, including two women and a child, and that 42 were injured.
Dr. Salam Jalali, a Public Health Ministry official, said 54 had been injured. He said the wounded had been taken to six different hospitals in Kabul, complicating officials' efforts to keep track of the casualties.
The explosion went off just before 8 a.m. on an Afghan work day, near a narrow dirt road where employees and civilians pass through a security gate. Shops, street photographers, and men who fill out Interior Ministry paperwork for illiterate Afghans make the area a busy cross-section of commerce and government.
The top U.N. official in the country condemned the "callous attack against innocent Afghans who were simply going to work."
"It is wrong for any conflict to be played out in a civilian arena with such wanton disregard for so many innocent lives," said Tom Koenigs, the head of the U.N. Assistance Mission in Afghanistan.
Bashary said the suicide attacker had been acting suspiciously, then tried to get close to a gathering of people just beyond a police checkpoint.
A witness said he saw the bomber run from police, who had tried to search him.
"The bomber ran into the area (past the checkpoint), and the policeman took out his gun — this all happened very fast — and then the guy detonated himself," said Ahmed Ramin, 18. "We saw lots of people killed and injured on the streets."
Militants have been stepping up attacks including roadside and suicide bombings across Afghanistan over the last several months.
Earlier this month a suicide car bomber rammed a U.S. military convoy in Kabul, killing 16 people, including two American soldiers, and a suicide bomber killed 18 people in an attack outside the Helmand provincial governor's compound in the town of Lashkar Gah on Tuesday.
Maj. Luke Knittig, a spokesman for NATO's international security force that controls much of Afghanistan, said Saturday's attack shows that the insurgents "recognize the significance of this nation's capital."
"They recognize we have them under pressure in their strongholds in the south and the east, so this does fit into, sadly, what we expected somewhat to see, them resorting to this kind of tactic, hitting softer targets and getting the additional significance attached to hitting the nation's capital," he said.
Shohib, 13, a worker in a nearby shop who goes by one name, said he was washing his hands in the back of the store when the explosion went off.
"When I looked into the shop I saw six people killed or injured there," he said. "When I came outside the shop I saw many other people killed and injured on the street."
Knittig said there is a recognition of a rising threat in the capital, and that citizens need to be more vigilant.
"But look at all the commerce and activities (in Kabul)," Knittig said. "There's a little bit of why the insurgents try to carry out attacks in the capital."