Special forces have killed two of the attackers، interior ministry spokesman Nasrat Rahimi told the BBC.
An official at the Afghan spy agency told AFP that the gunmen were "shooting at guests".
The attack began at about 21:00 local time (16:30 GMT)، officials said. There were no immediate details of casualties.
Security forces had cleared the first floor of the hotel but the attackers were still on the floors above، Mr Rahimi said.
The hotel guests included foreigners، and a fire has also broken out on the third floor where the kitchen is located، he added.
Some reports said the hotel had been hosting an IT conference attended by provincial officials at the time. One witness told Reuters news agency that the attackers had taken hostages.
The attack comes just days after the US embassy in Kabul issued a warning about hotels in the city.
"We are aware of reports that extremist groups may be planning an attack against hotels in Kabul،" the embassy wrote in a public security alert published Thursday، though it highlighted another hotel near the international airport as a possible target.
"These groups may also be targeting public gatheringsdemonstrations، government facilities، transportation، markets، and places where foreigners are known to congregate." A guest at the hotel told AFP that people were hiding in their rooms.
"I don't know if the attackers are inside the hotel but I can hear gunfire from somewhere near the first floor،" the guest said.
"We are hiding in our rooms. I beg the security forces to rescue us as soon as possible before they reach and kill us."