Mwai Kibaki, Kenya's president, and Raila Odinga, the country's prime minister, were present at the conference, which was examining a US trade law aimed at boosting US imports of products made in Africa.
"The absence of strong and effective democratic institutions [in Kenya] has permitted ongoing corruption, impunity, politically motivated violence and a lack of respect for a rule of law"
Hillary Clinton, US secretary of state
But Clinton criticised Kenya's leadership for not implementing reforms that formed the basis of a power-sharing deal agreed after deadly post-election fighting in 2007.
"Unfortunately, resolving that crisis has not yet translated into the kind of political progress that the Kenyan people deserve," she said after meeting Kibaki and Odinga, who were rivals in the presidential poll.
"Instead, the absence of strong and effective democratic institutions has permitted ongoing corruption, impunity, politically motivated violence and a lack of respect for a rule of law," she said.
"These conditions helped fuel the postelection violence and they are continuing to hold Kenya back."
Clinton criticised the new government's failure to set up a tribunal to investigate the outbreak of violence after the disputed election.
At least 1,000 people were killed in clashes between supporters of Kibaki and Odinga.
Mo Ibrahim, founder of the Mo Ibrahim Foundation, an organisation which assesses governance in Africa, said leaders across the continent should no longer be able to act with impunity .
"We need to choose justice. There have been a lot of terrible events in Africa and people have literally got away with murder," he told Al Jazeera.
|Hundreds of people were killed in post-election violence across Kenya [AFP]
"I think the rise of the civil society is quite important in pushing reforms. Some countries are lucky to have good leaders who are really able to clean up the act of governance. We have all the resources in Africa; it is really an issue of better governance."
Moses Wetangula, Kenya's foreign minister, told Clinton that "reforms are on course, that the war against impunity in the country is on, that the war against corruption is on."
But Odinga said that Clinton's concession of defeat to Barack Obama in the 2008 US presidential primaries should serve as a positive example to African countries holding their own elections.
"In Africa, in many countries, elections are never won, they are only rigged. The losers never accept that they lost," he said.
"If we do this, we will be able to develop democracy truly in the African continent."
Clinton is also set to hold talks in Nairobi the president of Somalia's interim government, which has come under attack from fighters who want to impose their interpretation of Islam across the country.
Kenya is the first stop on Clinton's seven-nation tour of Africa. She is set to visit South Africa, Angola, the Democratic Republic of Congo, Nigeria, Liberia and Cape Verde.