Suicide attackers have stormed the British Council office in the Afghan capital, Kabul, killing at least nine people and taking over the compound.
After a suicide car bomb destroyed the compound wall, a number of heavily armed men forced their way inside. Gunfire can still be heard in the area, which was rocked by another explosion several hours after the attack began.
The Taliban said the attack marked the anniversary of Afghanistan's independence from the UK in 1919.
The UK Foreign Office has condemned the attack, and said all British citizens had safely been removed from the building.
Eight Afghan policemen and a foreign security official were killed, authorities said, adding that four attackers also died.
Several hours after the attack began, Afghan intelligence officials said a lone injured gunman was still holding out.
"We tried to kill him by placing explosives around his location, but he is using an area with armoured doors and glass," the official told the BBC.
The BBC's Quentin Sommerville in Kabul reports that occupants of the British Council compound may have taken refuge in a reinforced safe room during the attack.
Wall collapsed Friday's strike was a three-phase attack, intelligence sources told the BBC: First, a suicide attacker detonated his explosive vest at a main square in western Kabul where police were guarding a key intersection shortly after 05:30 (01:30 GMT).
This is not the first time a major attack has taken place on Afghanistan's Independence Day.
Despite increased security, the insurgents managed to get into Kabul with a lot of weapons and suicide vests.
Last night, I accompanied Kabul's police chief, General Ayub Salangi, on a patrol of the city ahead of Independence Day.
At around midnight, the general deployed extra security forces in several locations, as intelligence reports warned of an imminent attack.
Ten minutes later, a suicide car bomber detonated his vehicle outside the front gate of the British Council, collapsing a wall which allowed the attackers into the compound.
There are fears that a number of Afghan policemen may have been buried in the rubble.As the area was evacuated, local shopkeepers say as many as nine suicide attackers armed with rocket-propelled grenades, heavy machine guns and AK 47s started firing as they ran towards the British Council building.
They have exchanged fire with police for hours and sporadic gunfire can still be heard in the area, residents say.
Police sources earlier said they believed the suicide attackers had "brought enough weapons to fight for a day".
British and US forces arrived at the scene shortly after the attack and Afghan police were providing support, Kabul officials said.
Condemning the "despicable attack", British Foreign Office Minister Alistair Burt said: "My thoughts are with those killed and injured and their families and friends, including locals working to protect the British Council building.
"It is due to the presence of mind of the staff involved and our good security measures that no British nationals were hurt," said Mr Burt.
"This attack, against people working to help build a better future for Afghanistan, will not lessen the UK's resolve to support the Afghan people."
The British Council is a partly government-funded agency which runs mainly cultural programmes.
The Afghan authorities earlier stepped up security in the capital, amid fears an attack could be imminent on the public holiday.
However, the Taliban have recently shown that they can strike pretty much anywhere in Afghanistan.
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