Police said that the blast occurred when a car packed with explosives was driven into the embassy gates. The blast ripped off the gates and damaged the building's outer walls, destroying nearby cars and shops.
No terrorist group has yet claimed responsibility.
Many of the dead and injured include people queuing for Indian visas.
Earlier reports said that 15 people had been killed and 20 wounded in the attack.
India has officially condemned what it called the "cowardly terrorist attack" in a statement issued today.
The Indian ambassador and his deputy are reported to have been away from the embassy at the time of the blast.
Extremist Islamic group the Taliban has vowed to step up terrorist attacks in the country. More than 6,000 people were killed in violence in Afghanistan during 2007 and according to official sources, with nearly 2,000 of them civilians.