Nato and the US currently have 143,000 troops in Afghanistan, a number that will peak at 150,000 in the coming weeks.
Another issue on the agenda will be the Afghan leader's plan to offer jobs and cash to Taliban members in exchange for them laying down their weapons.
That plan was endorsed at the last major conference on Afghanistan held in London in January.
Push for reconciliation
The conference is the first international meeting on the future of Afghanistan since the US-led invasion in 2001 to be held on Afghan soil, and the ninth international meeting since the war began.
All the previous meetings have been held in the West, starting with the Bonn conference in 2001, which made Karzai the head of the interim government.
Kabul has been locked down in a massive security operation, with thousands of Afghan and Nato soldiers deployed to guard against insurgent attacks.
The airport and key roads have been shut, and Monday and Tuesday were declared holidays.
Ban Ki-moon, the United Nations secretary general, is jointly chairing the conference alongside Karzai. He has called for the Afghan president to unveil "concrete" steps to improve governance and promote national reconciliation.
"We expect President Karzai and his government would come up with a concrete action plan... about the way to enhance good governance, promote further reconciliation and also how he can improve the security situation in his country," Ban told the AFP news agency.
Key donors attending the Kabul conference hope meeting will deliver assurances that their aid is being spent where it is intended.
Many Western nations are facing increased public pressure to justify their aid and military support to Afghanistan, which is widely ranked as one of the world's most corrupt countries.
Aid for Pakistan
Among those also attending the Kabul meeting is Hilary Clinton, the US secretary of state, who arrived in the Afghan capital late on Monday.
She had earlier visited neighbouring Pakistan, where she announced the first part of a $7.5bn aid package for the country, including funds for the construction of two hydroelectric dams.
Clinton said the funding was aimed at convincing Pakistanis that Washington's commitment to the country does not end with security.
US aid will also be used to renovate three hospitals, in Karachi, Lahore and Jacobabad; to launch several agricultural programmes; and to expand access to clean water in Pakistan.
Shah Mehmood Qureshi, the Pakistani foreign minister, said the US aid package would bring important benefits for Pakistan.
"This relationship is beyond security," Qureshi said. "This is a relationship that improves our purchasing power, our quality of life."