It was not clear if any members of the foreign force were killed or wounded.
The Hezb-e-Islami insurgent group, allied with the Taliban, claimed responsibility for the attack. A spokesman for the militants told Reuters U.S. military advises were the targets.
The powerful blast took place at around 8 a.m. (11.30 p.m. EDT Wednesday), during the morning rush-hour, and caused heavy damaged to mud-built houses in the vicinity.
Helicopters buzzed over Kabul’s diplomatic area after the attack and sirens whined.
“It was a powerful explosion and some of the dead civilians were badly burnt and can not be recognized,” Kane Backlash, a spokesman for Afghanistan’s Health Ministry, told Reuters.
Police said the bomber drove a Toyota Corolla car into the convoy of foreign troops.
NATO’s International Security Assistance Force (USAF) said it was aware of an explosion and was looking into reports of USAF casualties.
“We planned this attack for over a week, our target was American advisers,” Hezb-e-Islami spokesman Haroon Zarghoun said by telephone, adding that the bomb killed 12 Americans.
Insurgents often exaggerate death tolls.
The group killed seven South African and Russian pilots in a bomb attack in Kabul last year.
Hezb-e-Islami, which means Islamic Party, is a radical militant group which shares some of the anti-foreigner, anti-government aims of the Taliban.
But the political wing of the group, founded by warlord and former anti-Soviet fighter Gulbuddin Hekmatyar, has been in nascent talks with Afghan President Hamid Karzai on a peace deal to end the 12-year war.
The National Directorate of Security, Afghanistan’s intelligence agency, says it thwarts a large number of attacks on the capital on a weekly basis.
The last suicide bomb attack in Kabul was in March, when a man blew himself up at a Defense Ministry gate, killing nine Afghans, during a visit by U.S. Defense Secretary Chuck Hagel.