Al Jazeera's Hashem Ahelbarra, reporting from Kabul, described the vote result as a "huge blow" for Karzai and said it seems like the president is losing parliament's backing.
"The Afghan people are concerned that this could lead to a political deadlock ... I think Karzai is facing one of his biggest political challenges as we speak," he said.
"It seems like [Karzai] is increasingly besieged by a parliament which doesn't seem to be impressed by his choices, and a Taliban which is getting more ground in the country. A very, very delicate situation for the man."
Our correspondent said the rejection of the energy minister came as a big surprise.
"Ismail Khan is an extremely powerful man in Afghanistan. He is seen by his supporters as a great mujahid, a man who fought against Soviet in the 1970s and '80s. He seen by his rivals as a warlord," Ahelbarra said.
"Sarwar Danish, the minister of justice, has been criticised in the past over the handling of jails in Afghanistan and the mistreatment of Afghan prisoners."
Husn Bano Ghazanfar, the only woman nominated by Karzai, fell two votes short of being confirmed as minister for women's affairs.
Parliament stayed open for more than two extra hours on Saturday to finish voting for the ministers after a secret ballot process that began early in the morning but ran on all day.
Abdul Rahim Wardak, the defence minister, was the first to gain approval to stay on. Other ministers approved were those for agriculture, interior, finance, education, culture, and the combined portfolio of mines and industries.
Karzai had not proposed a nominee for foreign minister. He has asked incumbent Rangin Dadfar Spanta to stay in the post until after the January 28 international conference in London that is to discuss the way forward for Afghanistan.
|Parliamentarians rejected 17 of Karzai's nominees during Saturday's vote [AFP]
Karzai was re-elected in a disputed presidential election in August. He announced his cabinet nominations in late December, saying he had picked a group to represent the people of Afghanistan.
But critics argued that he was just recycling old names at a time when the country needs new blood in its efforts to battle corruption and reverse a deteriorating security situation.
Twelve of the 24 nominees are ministers in Karzai's current government.
Karzai is struggling to maintain support from Western governments, who insist he move forward with zero tolerance for corruption.
Transparency International, an anti-corruption watchdog group, says Afghanistan is the second-most corrupt country in the world, with only Somalia receiving a worse rating.
Saturday's parliamentary vote came as Karzai visited the southern province of Helmand to give his condolences to the families of civilians allegedly killed in a recent airstrike by international forces.
Abdul Rahim Wardak (defence), Farooq Wardak (education), Mohammad Hanif Atmar (interior), Omar Zakhilwal (finance), Sayed Makhdum Rahin (culture)
Sayed Mohammad Amin Fatimi (public health), Ismail Khan (energy), Amirzai Sangeen (communications), Husn Bano Ghazanfar (women's affairs), Obaidullah Obaid (higher education), Sarwar Danish (justice), Enayatullah Baligh (Hajj and Islamic affairs)
"We strongly request foreign forces in Afghanistan to stop irregular house searches and operations that are not coordinated (with Afghan forces), especially air strikes," Karzai said.
"We will pursue the issue of civilian casualties very seriously."
His comments came as witnesses reported hearing two rockets explode near the meeting hall where Karzai appeared.
A villager from Bulan, several hundred metres away from where Karzai was talking, told the Reuters news agency that two rockets had landed there during the speech, but no one was hurt or killed.
It was not clear if the rockets were fired at the president.
Meanwhile, in another high-stakes political issue, Ali Najafi, the chief of Afghanistan's election commission, said on Saturday that a parliamentary vote will be held on May 22.
However, about $50 million is needed from the international community to meet the election's estimated budget of $120 million, he said.
It was not clear whether the vote would or could be held if donor countries do not provide the money.
In the wake of last August's presidential election, tainted with allegations of fraud, critics have pushed Karzai and his government to delay the parliamentary vote, saying the country's electoral system needs serious reform.
But Karzai has insisted that the constitution, which specifies the elections be held by May, must be observed.