KABUL (AFP) - Military helicopters were firing above a mosque in Kabul's old quarter Tuesday (Aug 21) as officials said fighting had broken out between security forces and militants in the Afghan capital, with a barrage of rockets striking the city.

It was not immediately clear who was responsible for the assault, which came as President Ashraf Ghani was making a speech marking the first day of the Islamic Eid al-Adha holiday, days after offering the Taleban a conditional three-month ceasefire.

An Afghan army helicopter swooped in low over the street near the Eidgah Mosque in a central district of the city and fired a rocket on a militant position, sending a plume of dust into the sky. Interior ministry spokesman Najib Danish confirmed that militants had taken over a building near the mosque and fired several rockets.

"Two people have been wounded. Security forces are fighting the terrorists," he told AFP. People who moments earlier had been buying livestock for the Eid feast could be seen sprinting for shelter as cars swerved in the road to flee the fighting. Blasts and gunfire could be heard as security forces cordoned off the area.

The attackers appeared to be in a building behind the mosque, which was partially destroyed in another attack several years earlier and is not believed to have been in use for Eid.

A heavy security presence could also be seen near the Kabul Stadium.

Kabul police spokesman Hashmat Stanikzai said fighting began around 9am, and that multiple rockets had been fired on at least two areas of Kabul. He said he could not confirm casualties yet.

"Some attackers have taken a position behind the Eidgah mosque of Kabul city. The police forces are at the scene, and the area is blocked by forces. An operation has been launched to arrest or gun them down," he said.

The mosque is located relatively near the presidential palace, where Ghani was speaking. The sound of a blast could be heard in the background as his speech was aired live on Facebook.

Ghani unveiled the government's latest ceasefire gambit during an Independence Day address late Sunday, saying security forces would observe the truce beginning this week - but only if the militants reciprocated.

The truce offer was welcomed by the United States and Nato after nearly 17 years of war, but the Taleban have yet to respond.

The move followed an extraordinarily violent week in Afghanistan that saw that Taleban storm the provincial capital of Ghazni - just a two-hour drive from Kabul - and press the fight against security forces across the country, with estimates suggesting hundreds of people may have been killed.