A huge explosion shook Kabul early Friday and scattered gunfire broke out as ambulances rushed to the scene and loudspeaker announcements told bleary-eyed residents to stay indoors.

There was no confirmation of the cause of the blast, which comes after gunmen on January 18 stormed the commercial heart of the Afghan capital, taking over buildings, detonating suicide vests and killing at least five people.

The explosion struck around 6:30 am (0200 GMT), a day after the Afghan flag was raised over a southern town at the centre of a US-led offensive designed to evict Taliban militants and reinstate Afghan government control.

"We have had an explosion but at the moment we do not know the cause," interior ministry spokesman Zemarai Bashary told AFP.

"Our police have gone to the scene and they are investigating."

Health ministry spokeswoman Aminia Hashemi said ambulances had sped to a shopping and office complex in the heart of Kabul after an explosion on the fifth floor.

Brigadier General Larry Nicholson, commander of US Marines in southern Afghanistan, had welcomed the flag-hoisting in Marjah as "a new beginning" as Afghan government authority was restored after 12 days of fighting.

Afghans "believe there is a fresh start for Marjah under the government of Afghanistan", he said as the country's red, green and black flag was hoisted by the governor of Helmand province in front of several hundred residents.

Around 15,000 US, Afghan and NATO forces launched Operation Mushtarak (Together) on February 13 in what has been billed the biggest military operation since the 2001 US-led invasion brought down the Taliban regime.

But the early-morning blast in Kabul jangled residents' nerves afresh.

The explosion was followed by sirens, and a loudspeaker announcement telling residents to stay inside. Sporadic gunfire continued half an hour later.

Shar-I-Naw, a commercial and shopping district of Kabul, was sealed off by police, with no vehicles or pedestrians allowed in. A security expert said the explosion was possibly a car bomb.

Despite numerous military offensives, much of southern Afghanistan has remained beset by violence since the fall of the Taliban regime.

NATO and Afghan leaders say security and rebuilding must follow the latest military assault around Marjah, to ensure the Taliban do not return.

In contrast to the celebratory language from foreign and Afghan government officials, the Taliban said their fighters still held sway outside the main Marjah bazaar in the southern province of Helmand.

"Our mujahedeen are still in Marjah and still fighting, and the people are still with us, fighting the American invading forces," spokesman Yousuf Ahmadi told AFP Thursday by telephone from an undisclosed location.

The mission is aimed to capture the Marjah and Nad Ali areas of Helmand from the Taliban and drug lords, in the first big test of US President Barack Obama's surge of thousands more troops.

Speaking from the Helmand capital Lashkar Gah, provincial spokesman Daud Ahmadi said the civilian government had taken over responsibility.

But tight security on the ground and reports that Taliban fighters were still active in parts of Marjah, meant it was unclear how close the combined forces are to victory.

"If the Taliban see me talking to you, they'll kill me," an elderly man with a white beard told NATO troops in Showal, Nad Ali district, sliding his thumb across his throat.

Humanitarian groups have said residents are facing deteriorating conditions as food, medicine and other supplies run dangerously low and innumerable Taliban-planted bombs make movement in and out of Marjah perilous.