Two journalists from a local television station alongside lawmakers were among those injured in the deadly explosion at SYL Hotel near the presidential palace in the Somali capital.
Mahad Farah, a police officer at the scene, told Xinhua that the explosion happened a few meters from the SYL Hotel entrance when security guards fired at the car which they suspected was about to launch an attack.
"We have established the death of seven people and several others injured. The security guards fired at the car then it immediately exploded," said Farah.
The hotel, which came under similar attack in February this year, is frequently by senior government officials and diplomats.
The explosion ripped apart a section of the hotel. A security meeting was under way at the hotel.
Eye witnesses said the explosion was very powerful and shook buildings around.
"The whole place shook and then there was heavy gunfire. I could see many people lying on the ground injured and some dead," said Ahmed Yasin, a driver.
Somalia-based Al-Shabaab terror group, which repeatedly staged similar attacks on government buildings and officials, has claimed responsibility for the attack.