At least four people were wounded in the attack on Le Jardin, an Afghan-owned eatery, which caused a piercingly loud explosion and left a building engulfed in flames.
The attack comes a day after Afghanistan announced four-way talks in Pakistan on January 11, aimed at jump-starting peace negotiations with the resurgent Taliban.
"We can confirm a suicide car bomb attack on Le Jardin," Fraidoon Obaidi, the head of Kabul's Criminal Investigation Department, told AFP.
The information was corroborated by a Western official in Kabul.
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Security forces cordoned off the area and firefighters and ambulances were seen rushing to the restaurant, which sports a large garden festooned with rose bushes and is a popular hangout for foreigners.
Taliban spokesman Zabihullah Mujahid on Twitter claimed several foreigners had been killed and wounded in the suicide attack.
Taliban insurgents routinely exaggerate the death toll in attacks on government and foreign targets.
The Afghan health ministry said four people were wounded and taken to hospital for treatment, without confirming their nationality. It rejected local media reports claiming that a 10-year-old child had been killed.
Both sides agreed to hold a first round of dialogue between Afghanistan, Pakistan, US and China on January 11 to lay out a comprehensive roadmap for peace, officials in Kabul said.
Pakistan -- the Taliban's historic backers -- hosted a milestone first round of talks in July but the negotiations stalled when the insurgents belatedly confirmed the death of longtime leader Mullah Omar.
Afghanistan sees the support of Pakistan as vital to bring the Taliban to the negotiating table.
On Monday, just a day after Sharif's visit, a Taliban bomber detonated an explosives-packed vehicle near Kabul airport, killing one civilian in an attack targeting a NATO convoy.