"This is a historic moment for our country and from tomorrow all of the security operations will be in the hands of the Afghan security forces," Karzai said at the ceremony, held at the new National Defense University built to train Afghanistan's future military officers.
Karzai says his army has been training for years and they're now strong enough to stand alone. A full withdrawal of American and NATO soldiers from the country should take about 18 months.
The handover of responsibility marks a turning point for American and NATO military forces, which will now move entirely into a supporting role. NATO's security general says the coalition will help militarily if and when needed.
Karzai said he will also soon send representatives to the Gulf state of Qatar to discuss peace with the Taliban. The talks in Doha would follow the planned opening of a Taliban political office in the Arab country.
"We are hopeful that if the opening of the office is today or if tomorrow the negotiation for peace starts sooner between the High Peace Council and the Taliban," Karzai told reporters.
At the G-8 summit, President Barack Obama said the opening of a Taliban political office in Qatar is an important first step toward reconciliation, but that it won't be easy.
Mr. Obama says the Taliban still must denounce al Qaeda. He praised Karzai for taking a courageous step by sending representatives to Qatar to discuss peace with the Taliban.
The Associated Press contributed to this report.