The attackers charged into the hotel at around 9pm local time (4:30pm UK time) and began gunning down guests, officials said.
Details of the incident were unclear but the attackers appeared to have included suicide bombers, interior ministry spokesman Najib Danish said.
An official at the Afghan spy agency said: “Four attackers are inside the building and they are shooting at guests.”
A guest hiding in his room said: “I don’t know if the attackers are inside the hotel but I can hear gunfire from somewhere near the first floor.
“We are hiding in our rooms. I beg the security forces to rescue us as soon as possible before they reach and kill us.”
The fourth floor of the hotel is on fire, according to an official from the National Directorate of Security.
Afghan news agency TOLO reported that police sources confirmed that hostages had been taken.
There was no immediate claim of responsibility for the attack, the latest in a long series to have hit Kabul.
The hotel, located on a hilltop and heavily protected like most public buildings in the city, was previously attacked by Taliban fighters in 2011.
It is one of two main luxury hotels in Kabul and is used for events including conferences attended by government officials.
Some reports said the hotel had been hosting an IT conference at the time of the attack.