Islamabad and Kabul also signed Pak-Afghan investment agreement to boost bilateral investment and to protect private investors.
Senior officials also concluded the two-day Pak-Afghan Joint Ministerial Commission proceedings the same day.
Interior Minister Aftab Sherpao, Foreign Minister Khurshid Mehmood Kasuri, Minister for Tourism Dr Ghazi Ghulab Jamal and Communications Minister Shamim Siddiqui, Governor NWFP Khalilur Rehman, Governor Owais Ghani and Premier's Advisor on Finance Salam Shah were also present on the occasion at the press briefing.
Shaukat Aziz and Karzai termed the Pak-Afghan relations as strong but conceded they faced challenges at times, adding there was a need to consolidate mutual trust and coordinate efforts to fight out terrorism and extremism.
Both the leaders also exchange views on the issues confronting the Ummah and the future of Organisation of Islamic Conference and the reforms in the United Nations.
Premier Aziz described his meeting with President Karzai as 'wide-ranging, broad-based and result-oriented', and both reiterated to expand cooperation in economic field, investment, fighting the menace of extremism and terrorism.
It was decided that PIA would initiate flights to Kabul from Quetta and Peshawar, besides early construction of the rail track from Chaman to Spin Boldak and to Kandahar afterwards.
Both sides also agreed on expansion of cooperation in road transport, as Pakistan gifted another 7 ambulances to Kabul. Already, 38 such vehicles have been handed over to Afghan government.
The Prime minister said that Pakistan and Afghanistan shared destiny and commonalties and both were keen to do more for the welfare of their peoples.
"Pakistan wants broad and deep relations with Afghanistan in all spheres of common interest. In this connection, the JMC meeting was highly productive," he said.
Shaukat Aziz made it clear that a peaceful and stable Afghanistan was key to Pakistan's betterment and was in the interest of whole region.
He said that Islamabad was strongly in favour of seamless cooperation with Kabul in security, economic and other fields. However, Shaukat Aziz conceded that they were confronted with challenges at times, which they could only tackle together.
"We feel that a prosper and peaceful Afghanistan is our strength. Therefore, we earlier announced 100 million dollars grant for the country and today announce another $100 million for its reconstruction to help ensure a better future for Afghan nation."
The Prime Minister said the meeting with Karzai, among other issues, focussed on enhancement of bilateral investment and in this connection, they signed an investment protection treaty.
Shaukat Aziz pointed out that bilateral trade was registered at 100 million dollars each month and hence it was to cross the $1 billion mark annually, saying it was a win-win situation for both countries.
Later, replying to questions, Afghan President Karzai said that there had been significant increase in terrorist attacks in three months and added Afghanistan had very deep interest in its relations with Pakistan.
"Strong relations between the two countries are of utmost benefit, as in case one suffers due to terrorist attack, the other also feels hurt. Terrorism hurts both of us," he remarked.
The Afghan president called for building more trust on each other and expressed hope that with coordinated efforts they could tackle the terrorism issue effectively.
To a question, Shaukat Aziz underlined need for increasing the level of information-sharing to defeat terrorism. "The people of both countries want peace and prosperity and are against any elements trying to destabilise them".
He said Pakistan had been making all-out efforts to eliminate terrorism and doing whatever it could to help Afghanistan fighting the menace. In this context, the Prime Minister said Pakistan never in history deployed some 80,000 troops along Pak-Afghan border, supported by aerial surveillance, posts and reconnaissance helicopters.
Karzai to another question said that Islam had nothing to do with the acts of terrorism, taking place in London or elsewhere. "Whosoever, takes life of an innocent in the name of Islam, harms our religion".
Shaukat Aziz said that Islam is a religion of peace and harmony and it never promotes or propagates extremism in any form, adding the Muslims were weary of ongoing acts of terrorism.
Pakistan government handed over 2 million books, 40,000 school kits and 12,500 tonnes of food and 2000 tents to the Afghan government, besides 15,500 flour bags.
Meanwhile, a round of Kabul revealed that either no reconstruction was taking place or its pace was very slow and also on a limited scale. However, there was routine rush in Kabul's markets and bazaars, as Afghanistan observes holiday on Friday.