Karzai warns of threats in inaugural Afghan presidency address
The US-backed leader, wearing a traditional green robe and a lambskin hat, took the oath of office in a ceremony in the war-damaged former royal palace.
US Vice-President Dick Cheney, the highest-ranking US official to visit Afghanistan since the fall of the Taliban in 2001, and Defence Secretary Donald Rumsfeld attended.
Mr Karzai repeated the oath of allegiance read to him by Afghanistan's chief justice, Fazl Hadi Shinwari, then swore in his two vice presidents, Ahmad Zia Massood and Karim Khalili.
Kabul was calm amid massive security, but attacks near the Pakistani border left 12 dead.
In his inaugural address, Mr Karzai said the hopes of ordinary Afghans would drive him during his five- year term.
He pledged to crack down on the opium trade, disarm militias and lift living standards.
"We have left a hard and dark past behind us and today we are opening a new chapter in our history in a spirit of friendship with the international community," he said.
He said the fight against terrorism was "not yet over" and urged international cooperation to defeat links between extremists and drug-trafficking.
"The same cooperation has led to the rebuilding of the Afghan state and significant progress in restoring peace, stability and security to our country."
Wary of attacks by Taliban or al-Qaida militants, Afghan and international forces launched their biggest security operation since the October election that gave Mr Karzai a landslide victory. Hours before the ceremony, a firefight in Khost province left four Afghan soldiers and at least six militants dead. Insurgents also opened fire on a US patrol, which killed two assailants.
Mr Cheney said the establishment of a democracy was necessary to Afghanistan's "basic, fundamental transformation".
"It has to happen, if you will, if we're going to win the war on terrorism," he added.
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