Afghan security forces clashed with a group of suspected Taliban militants holed up in a house close to Kabul's old city on Wednesday, witnesses and police said.

The clash erupted after Afghan forces surrounded a house on Tuesday night where the suspected militants were hiding in the area of Gozargah, in the foothills leading up to the old city walls, said a police official who declined to be named.

Two officers of National Directorate of Security (NDS), the state security and intelligence service, were killed in the fighting, one of the police officials said.

"A group of Taliban have hidden themselves in a house they rented a long time ago," he said. "Afghan intelligence officers found out about them and went there at midnight last night. At 2 a.m., sporadic fighting started and two officers were killed."

The crack of small arms fire and occasional explosion from a rocket-propelled grenade could still be heard mid-morning. The road linking the area with the centre of the capital was blocked by police and reporters were kept well back from the scene.

NDS forces were leading the assault on the house, backed by the Afghan army and police, but the group of insurgents were well armed and had plenty of ammunition, the police officer said.

The clash comes just days after a group of Taliban gunmen opened fire with small arms and rocket-propelled grenades at a state parade sending President Hamid Karzai, his cabinet and the military top brass diving for cover.

One member of parliament, the head of a minority group and 10-year-old boy were killed in Sunday's attack before police killed three Taliban gunmen.

Taliban fighters fled Kabul in late 2001 in the face of a U.S.-led aerial onslaught and a ground assault by Afghan militia.

In the years immediately after 2001, the Taliban regrouped and two years ago relaunched their insurgency with guerrilla attacks on Afghan and international troops mainly in the south and east, backed by suicide bombs right across the country.

The hard-line Islamist militants last year moved into areas immediately south of Kabul and have launched sporadic suicide bomb attacks in the city, but have not before been detected in any numbers in the capital before.