Those militants were eventually killed by Afghan security forces or killed themselves by detonating their explosive-laden suicide vests. But not before mounting an attack that left three Afghan soldiers and two civilians dead, plus another 75 people wounded.
The incident generated headlines around the world.
"A terrorist attack is under way in this corner of Kabul close to Arg [presidential palace]. This is one of the threats confronting Afghanistan -- only one of the threats," Karzai stressed in words to his cabinet at the inaugural ceremony.
"Other threats facing Afghanistan are worse. They can damage Afghanistan even more, and these are internal and external threats challenging Afghanistan."
Afghan experts say that among the "other threats" Karzai increasingly worries about is a worst-case scenario wherein the West finally tires of the struggle in Afghanistan and abandons the country to its troubles.
The precedent, of course, is fresh memories. Western powers largely forgot Afghanistan after the withdrawal of the Soviet Red Army in 1989. In the subsequent years, the country plunged into a destructive civil war. That war was fed in part by Afghanistan's neighbors waging their own proxy wars for regional hegemony on Afghan soil.
It is this fear of running out of time that appears to loom over Karzai's approach to the one-day international summit on Afghanistan taking place in London on January 28.
He is coming to the British capital to sell the international community on a comprehensive reconciliation plan he hopes to present to the Taliban and other insurgent groups. His audience will be senior U.S. and European officials and representatives of 60 or so other countries.
Mohammad Masoom Stanekzai, a key Karzai adviser and the architect of the new Taliban reconciliation plan, says conditions are now ripe for such an initiative. "I think most Afghans have now concluded that this [violence] is in nobody's interest. It's not in the interest of the Taliban and other people of Afghanistan," Stanekzai says.
"We now have conditions, which allow anybody to join a political stream, and through that avenue everybody can participate in politics and power under the Afghan parliament and Afghan Constitution," he says. "We should not view this peace program as an effort to reconcile criminals or as a mere propaganda stunt."
Stanekzai says the plan would seek to entice Taliban members by offering jobs and security, something that Kabul's past reconciliation plans failed to do.
Critically, the plan also would kick off with a traditional Afghan Loya Jirga, or grand assembly of tribal leaders, to develop a national consensus for the effort and convince insurgents they would have a place in the new political system.
Pakistan and Saudi Arabia would play critical roles. Islamabad and Riyadh bankrolled the Taliban regime in the 1990s, and the two are still seen as holding influence over key Taliban networks.
But it remains to be seen whether Karzai's ambitious initiative can get the additional traction it needs -- strong backing from this week's London conference.
Journalist Ahmed Rashid says that although there is considerable Western support for the Karzai reconciliation plan, the London conference may lack the necessary groundwork for any major breakthrough. "Unfortunately, I see it as another photo opportunity, and clearly there will be some announcement such as the plan for trying to reintegrate Taliban fighters -- reconciling them with the government," he says.
Rashid suggests that the announcements to be made in London could have been easily postponed "until better preparations had been done."
Former European Union diplomat Martine van Bijlert agrees. Based on her extensive experience of working in Afghanistan, she says that the London conference is "aimed at sending messages and giving a sense of momentum."
Van Bijlert says the priority for Afghans and the international community is the gradual handover of security to the Afghan forces but that Taliban reconciliation plan is trickier. "There hasn't been very much strategic thinking about...how all those parts come together," she says.
"If you want to have a peace process, you need to build confidence, which is very difficult if you are actually ramping up attacks, if you are actually trying to buy people over," van Bijlert says. "So there are definitely potential contradictions in what is possibly going to be done."
Just as Karzai will try to sell his reconciliation plan, his Western backers will expect him to commit his security forces to gradually take over security responsibilities. Recent media reports suggest that the international community wants to fund the expansion of Afghan military and police forces to 300,000 by the end of next year.
'As Long As It Takes'
Bedeviling the plans of all concerned -- from the international community to Karzai -- are two more factors: timing and the level of confidence among the partners.
Rashid says the London conference comes against a regional backdrop that is "very depressing." He suggests that "most Afghans feel very nervous about giving this date certain of June-July 2011 when they want to transition to Afghan forces."
He says Afghans "still don't have confidence that the Afghan forces can stem the tide of the Taliban."
Rashid suggests that behaviors of regional courtiers will be the key. "In the region, I think, some of the neighboring countries like Iran, Pakistan, [and] India have kind of decided perhaps already that the Americans are leaving," he says.
"And that of course, the danger it that it could fuel local, regional rivalries -- the kind we say in the 1990s when regional countries fueled the civil war."
NATO has repeatedly sought to assure Afghanistan that will not happen.
Speaking in an exclusive interview with RFE/RL on January 25, Secretary-General Anders Fogh Rasmussen again assured Afghans of the military alliance's continued support. He said Western forces in Afghanistan "will stay as long as it takes to secure the country."
Rasmussen also was adamant that concrete results will be achieved in London. He said both the alliance and Kabul agree on the goal of helping Afghanistan to stand upon on its own feet. "Firstly, that we agree on the overall framework for a transition to lead Afghan responsibility for the security. We have to make sure that the transition for responsibility to the Afghan security forces takes place in a coordinated manner," he said.
"And secondly, I would expect that the international community as well as the Afghan government commit themselves to a reinforced civilian reconstruction and development in Afghanistan."
Now the key to watch for in London is to what degree the international community and Karzai can not only agree on goals but also bridge the gaps between their priorities.
And then, of course, there is the longer-range challenge of whether they can deliver on their promises.