The announcement means Karzai will appear at an international conference on his country's future on January 28 with 11 of 25 cabinet seats vacant.
Confirming his cabinet is the first big test for Karzai since his re-election in a vote last August that was marred by fraud, which took months to resolve.
He has promised to name competent ministers but also owes favors to regional bosses who helped get him elected. Parliament has twice rejected most of his picks.
Western countries with troops serving in Afghanistan are anxious for Karzai to put his new government in place and to build the institutions needed to withstand a Taliban insurgency that is fiercer than at any time in the eight-year-old war.
The United Nations Special Representative in Afghanistan, Kai Eide, praised the ministers agreed on so far but lamented delays in getting the full cabinet in place, saying this had an impact on the government's ability to deliver.
It is a handicap that you will now go on for a protracted period without a fully-functioning government in one of the most challenging periods the government has been in since the fall of the Taliban, Eide told Reuters in an interview.
Before breaking, lawmakers also demanded reforms for parliamentary elections due this year, setting the country back on a path toward political confrontation after the botched presidential poll last year.
Parliament spokesman Haseeb Noori said lawmakers would now break until February 20. Karzai ordered them to delay their leave earlier this month to allow him to pick new names after the bulk were rejected, but this time he did not forbid them to go.
Karzai's spokesman, Waheed Omer, said the president would nominate new candidates for the vacant seats when lawmakers return. Until then, Karzai would direct deputy ministers or other caretaker figures to run their ministries, Omer said.
Karzai's re-election has damaged his standing at home and abroad and led to months of drift. He and his allies are hoping to turn the page on that uncertainty in 2010, but a fresh political crisis looms with the parliamentary poll due in May.
The United Nations has millions of dollars in an account earmarked to hold that vote, but Western officials say they want to see election reforms enacted before the funds are released, to prevent a repeat of last year's fraud.
Omer said Karzai had told visiting U.S. envoy Richard Holbrooke on Saturday that the parliamentary election must be held on time on May 22 this year, a date many Western officials fear is too soon to enact needed reforms in time.
Parliamentarians backed the May 22 election date in their final debate on Sunday but called for reforms to the election commission, which Karzai's opponents blame for fraud.
They said the poll must be fair and transparent and for that there should be changes in the election commission, for it is under question, said MP Mir Ahmad Joyenda.
Delegates said the heads of the lower and upper house of the parliament along with the chief justice should consult on this with the president.
Diplomats say they hope to avoid a clash over the date by persuading Afghans to allow the vote to be pushed back.
Holbrooke told Reuters that Washington and its allies supported holding the election sometime this year:
The exact date is far less important than the fact that international community has come together and coalesced together around a date in this calendar year. We've crossed that bridge.
(Additional reporting by Sue Pleming; Editing by Elizabeth Fullerton)