Some Western and Afghan security experts believe the Haqqani Network, a hard-line wing of the Taliban, has been behind some of the attacks in Kabul in recent months, including those claimed by IS.
Wednesday's attack came after a string of similar attacks in the Afghan capital this year, with the largest attack carried out at the end of January when the Taliban detonated an ambulance full of explosives in the central district of Kabul, killing over 100 people.
Militant group Islamic State, which has claimed several previous attacks on Shi'ite targets, claimed responsibility, its Amaq news agency said.
"There was a huge explosion and I saw a lot of people running away", said Sayed Omer, who was nearby at the time of the blast, near the city's main university.
According to Police, another 18 people were wounded in Wednesday's attack.
In October, insurgents controlled or influenced almost half of Afghanistan's districts - double the percentage in 2015, the United States government's office of the Special Inspector General for Afghanistan Reconstruction said in January.
Blood stains and belongings are pictured on the road at the site of a suicide bombing attack in Kabul.
Earlier in the day, media reported that an explosion occurred next to the University of Kabul, leaving at least three dead and 10 people injured.