According to the temple official Gornam Singh, there were at least 30 people inside the temple. "We don't know how many of them are alive or how many dead," he said, adding, "The Taliban are not allowing us to go inside, we don't know what to do."
As per the images aired by local broadcast channel Tolo, grey plumes of smoke could be seen billowing over the temple.
A spokesman for Kabul's commander said his forces had taken control of the area and cleared it of attackers. He revealed that one Sikh worshipper had been killed in the attack and one Taliban fighter killed during the clearing operation.
Although the Taliban believe that since coming into power last August, they have cleared the security risk in Afghanistan, international experts and analysts are of the opinion that the risk of resurgence in militancy still remains.
Some attacks in recent months have been claimed by the Islamic State militant group.
Sikhs are a tiny religious minority in largely Muslim Afghanistan, comprising around 300 family members before the Taliban took over. After the fall of Kabul, many left the country, according to community members and media reports.
India's foreign ministry expressed concern over reports of the attack. "We are closely monitoring the situation and awaiting further details," foreign ministry spokesman Arindam Bagchi said in a statement.
Saturday's explosion follows another blast at a mosque in the northern city of Kunduz the previous day (Friday) that killed one person and injured two, according to authorities.