The Afghan government took control of nationwide security on Tuesday and ordered envoys to try to open peace talks with the Taliban as US-led troops prepare to withdraw after 12 years of war.
President Hamid Karzai announced the security handover at a military academy outside Kabul, marking a major milestone in the long and bloody foreign combat mission that began after the 9/11 attacks in 2001.
Karzai pledged that Afghan forces were ready to take on insurgents, but persistent violence was highlighted when a bomb targeting a lawmaker killed three people in the capital just before the ceremony began.
"Our security and defence forces will now be in the lead," Karzai told Afghan and NATO officials at the ceremony, the timing and location of which had been kept secret due to fears of a militant attack.
"From here, all security responsibility and all security leadership will be taken by our brave forces," he said.
Doubts remain over the ability of Afghan forces to beat the Taliban, and the NATO coalition will retain an important function in logistics and air support as well as in combat emergencies.
NATO chief Anders Fogh Rasmussen said that by taking the lead in security, Afghan forces were completing a five-stage transition process that began in March 2011.
"They are doing so with remarkable resolve," he said. "Ten years ago, there were no Afghan national security forces... now you have 350,000 Afghan troops and police, a formidable force," he said.
"We will continue to help Afghan troops in operations if needed, but we will no longer plan, execute or lead those operations, and by the end of 2014 our combat mission will be completed."
Karzai used his speech to give a boost to peace efforts, saying that government envoys would travel to the Gulf state of Qatar to try to open negotiations with the Taliban.
"Our High Peace Council (HPC) will go to Qatar, they will talk to the Taliban," the president said.
"We hope that with the opening (of a Taliban office in Qatar)... the peace talks between the HPC and the Taliban start as soon as possible."
The handover of the last 95 districts from NATO to Afghan control includes areas in the south and east where the Taliban have concentrated their insurgency since 2001.
As Afghan soldiers and police take over the fight against the militants, the 98,000 foreign troops will focus on training and mentoring roles.
"The reality is Afghan forces are not dreadful, but they're probably not sufficiently capable to drive the war to a conclusion," said Stephen Biddle, professor of international affairs at George Washington University.
"My guess is they will be able to maintain the stalemate, provided the US pays their bills," he told AFP.
The Taliban have a proven ability to strike at Kabul as the country prepares for presidential elections next year and the NATO withdrawal.
Haji Mohammad Mohaqiq, a leader of the ethnic Hazara minority who is likely to play a key role in April's presidential vote, was unhurt in Tuesday's bomb attack but his clothes were burnt.
"Four of my guards are wounded and are in hospital," he told AFP. "I heard a big explosion on the side of the car. Only my cloak is a little burned, other than that I'm fine."
Mohammad Zahir, the police investigations chief in Kabul, told reporters at the scene that three civilians were killed and 24 others, including some guards, were wounded when the improvised explosive device detonated.
On Tuesday last week, a suicide car bomb killed 15 civilians outside the Supreme Court in Kabul. The previous day, gunmen fired grenades at the city airport.
Despite the attacks penetrating the capital's defences, the effective response of elite Afghan security units has been widely hailed as a sign of increasing professionalism.
Concern over the Afghan forces' capacity have been fuelled by high rates of desertion and fears for the future of foreign aid post-2014.
On Friday, the US commander of the NATO mission in Afghanistan warned that gains secured over the last 12 years would be lost if donor nations cut back support after the foreign withdrawal.
"We are not where we need to be yet," US General Joseph Dunford told foreign journalists.
"The continued presence of the international community -- politically, in development and in security -- is necessary to sustain the progress that we have made."
According to independent website icasualties.org, at least 3,336 foreign troops have died since the start of operations in 2001.