Former foreign minister Abdullah Abdullah has pledged to take part in the second vote, expected on November 7th.
'We are completely ready for the second round,' Dr Abdullah said last night.
President Karzai said yesterday he would accept complaints over widespread fraud by a United Nations-backed commission into the initial election in August.
Observers have said Mr Karzai's hand was effectively forced by the country's own Independent Election Commission saying one-third of votes for the incumbent president were fraudulent, pushing his vote share below the 50 per cent needed to avoid a second vote.
The president's announcement has been warmly welcomed by both Gordon Brown and Barack Obama.
'It is now vital that all elements of Afghan society continue to come together to advance democracy, peace and justice,' the US president said.
Mr Brown added: 'The priority now is for all elements of Afghan society to come together to ensure that the democratic process continues as securely as possible.'
Meanwhile, the United Nations is seeking the removal of hundreds of officials involved in the initial vote.
UN secretary general Ban Ki-moon said if the runoff was to be 'transparent' officials implicated in the reported fraud should not take part.
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