The date has been set up as November the seventh in a race against the coming winter and to save some credibility for the battered election process.
Talk of an eventual coalition between Karzai and his main rival, former Foreign Minister, Abdullah is still in the air but one Afghanistan watcher says the bigger issue that the international community should urgently attend to is constitutional reform.
Presenter: Linda Mottram, Canberra correspondent
Hamid Karzi, incumbent Afghan President; Ban Ki Moon, UN Secretary General;
Dr Abdullah Abdullah, Afghan Presidential candidate; Nazif Shahrani, Professor of Central Asian Studies, Indiana University.
MOTTRAM: After the U-N backed Electoral Complaints Commission this week threw out almost a third of Hamid Karzai's votes because they were fraudulent, the U-S and European leaders pressed the Afghan leader to move quickly to resolve the electoral crisis .. which has run for more than two months.
Flanked by U-S Senator John Kerry, who's been holding intensive day by day meetings with Mr Karzai, and U-N envoy Kai Eide, Hamid Karzi made the announcement that his hand-picked Independent Election Commission had agreed to the run-off poll..
MOTTRAM: We consider the decision made by the Independent Election Commission, Mr Karzai said, as legal and right. He went on to say it was a constitutional decision in the best interests of the Afghan nation and that would strengthen the country's democracy. He wished his opponent, Doctor Abdullah, well.
Hamid Karzai appeared under strain. He had openly questioned the international process for vetting the August 20 ballot, believing foreign forces were conspiring to steal the Presidency from him. But with his vote reduced to below the 50 per cent required to avoid a run-off poll, and with the international view clear, he was left with little choice.
Senator Kerry praised Mr Karzai's statemanship. the U-N Secretary General Ban Ki Moon cautioned the election would be a difficult challenge.
BAN: We will try our best in close co-ordination with Afghan leadership and Afghan institutions to make this election as fair and free of fraudulence.
MOTTRAM: Abdullah Abdullah has welcomed Mr Karzai's decision. And, ahead of the announcement, he told National Public Radio in the United States that if the issue of fraud was acknowledged, there could be the prospect of a political deal.
ABDULLAH: In a situation that fraud will be partly taken care of, then that I think create new realities on the ground.
MOTTRAM: Doctor Abdullah wouldn't be drawn on details without he said a mandate from the people.
ABDULLAH: This looks like the last chance for Afghanistan. If we cannot get it right, then the people of Afghanistan will be disappointed, our friends around the world will be disappointed.
MOTTRAM: Afghan born American academic Nazif Shahrani is Professor of Central Asian studies at Indiana University and describes current political arrangements in Afghanistan as a kleptocracy. Professor Shahrani says the real need is for constitutional reform, to reduce the current concentration of all powers in the Presidency.
SHAHRANI: So the first thing that I think the country needs is a new constitution in the country. And that has to be a top priority for international community if they're going to give some assurance to the people of Afghanistan.
MOTTRAM: Do you think there's a chance that there could be a political fix to solve the electoral problem, in other words a deal between President Karzai and Doctor Abdullah?
SHAHRANI: That's always possible. But I don't think a coalition government of these two candidates, one of them of course accusing the other of having stolen and has acted as a thief in this process, will be a positive step forward. That government cannot work. They would be too busy I think with their own turf fights and so on. And that would be a disaster for Afghanistan. But international community has to have some agenda for the next five years politically. First, constitutional change and constitutional amendment has to be in place. Secondly they have to insist on better governance and changing the situation so that there will be local government structures. That they would have to take and limit the powers of the central government to making law and perhaps overseeing the law, oversight but the implementation and management of the law has to be let go to the local communities.
MOTTRAM: And Professor Shahrani says that must include the Taliban, whose shadow government structures across almost half of Afghanistan are proving such a headache for western strategy in the country.