The attack, claimed by the Al-Qaeda-aligned Shabaab insurgents, began when a car loaded with explosives rammed the gate of the Dayah Hotel near the Somali parliament and state house.
Security sources said at least four gunmen then entered the compound and exchanged fire with security guards, but they were shot dead before reaching the main building where guests were staying. They were not counted among the 28 dead.
A second massive blast went off after ambulances and journalists had already rushed to the scene, leaving seven reporters with minor injuries, according to the National Union of Somali Journalists (NUSOJ).
"The number of casualties we have recorded today is 28 dead and 43 wounded. This is what we have confirmed with our teams but there were also other ambulances which carried some casualties (but) I don't know how many," said Dr Abukadir Abdirahman Adem, head of the ambulance service.
Somalia's Security Minister Abdirisak Omar Mohamed told reporters there were 10 people killed and 51 wounded in the attack.
"We commend the security guards of the hotel who fiercely fought the Shabaab attackers to defend the hotel," he said.
Gunfire rang out from the hotel as civilians and rescue workers carried away the injured. The Shabaab group claimed responsibility in a statement distributed on its Telegram messaging account.
"The mujahideen fighters have attacked a hotel and have managed to enter the hotel after detonating a car loaded with explosives," it said.
The Shabaab is fighting to overthrow the internationally-backed government of Somalia and regularly stages deadly attacks on state, military and civilian targets in the capital and elsewhere in the war-torn country.
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