"The bomber and one bystander were killed and seven others, including security guards and some passersby, were wounded in the blast," witness Mohammad Murtaza told the agency.

"The incident might have been a coordinated group attack by militants," the witness said, adding that it seemed that two militants took position inside the attacked building and a gunfire was underway.

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Unofficial sources said at least three militants were involved in the attack.

The Taliban militant group claimed responsibility for the attack.

The Taliban-led insurgency has been rampant since April when they launched their annual rebel offensive.

The Taliban have urged civilians to stay away from official gatherings, military convoys and centres regarded as the "legitimate" targets.

Earlier, around 38 civilians, 12 security forces and 11 Taliban fighters were killed during a 24-hour-seige, which ended on Wednesday night, at a residential area near an airport in Kandahar province, the report said.