The suicide bombing was followed by gunfire near consulate in the city of Jalalabad.
The Ministry of External Affairs has said that all officials inside the consulate are safe.
Nangarhar province Police Chief Gen Sharif Amin said the car bomb was set off near a mosque leading to the Indian consulate in the provincial capital Jalalabad.
Afghan security forces sealed off the scene and several ambulances rushed to the site.
“Explosion in front of India’s Consulate in Jalalabad. MEA in touch with officials. All officials are safe,” tweeted Syed Akbaruddin, official spokesperson, MEA in New Delhi.
The blast sent a plume of grey smoke above the scene, and damaged several houses and shops nearby.
No group has claimed responsibility for the attack.
Indian diplomatic missions have been targets of previous attacks in Afghanistan.
The eastern border province of Nangarhar, and its capital Jalalabad, have long been a hotbed of insurgent activity.
On Friday, a five-hour battle between Afghan security forces and Taliban fighters in the province’s Shirzad district killed dozens of Afghan police and insurgents, officials said.