"Votes from 447 polling stations across the country have been nullified because of fraud," Noor Mohammed Noor, an IEC spokesman, said.
He said that as each polling site had about 600-700 ballots, the cancelled votes "could be around 200,000 votes".
The New York Times newspaper reported that Afghans loyal to Karzai set up as many as 800 fictitious polling sites ahead of elections, where no one voted but hundreds of thousands of ballots were recorded toward Karzai's re-election.
The report cited unnamed senior Western and Afghan officials.
Alleged fraud
Karzai now leads Abdullah Abdullah, his main challenger and former foreign minister, by 48.6 per cent to 31.7 per cent, according to the latest figures from the Afghan election commission.
But the incumbent president is still short of the 50 per cent of the vote needed to avoid a run-off.
About three-quarters of ballots have been counted.
The final tally of votes is scheduled for this week, but authorities still have to investigate over 2,000 allegations of election fraud.
James Bays, Al Jazeera's correspondent in Kabul, reported that the opposition had complained about the process of releasing a succession of partial results, and that the complaints should be dealt with first.
"It's still very complex and the political temperature is still very high," he said.
The August 20 poll was the second time Afghanistan held elections and the first to be conducted independently.
US-German dispute
As internal tensions over the election mount, Nato allies Germany and the US are locked in what could become a major dispute over a German-ordered air raid by US fighters that appears to have killed Afghan civilians.
Afghan and Nato officials have already begun investigations into the attack in the northern province of Kunduz.
Afghan officials say up to 70 people were killed in the early morning air raid on Friday, which targeted two tanker trucks of fuel, hijacked by the Taliban, but around which villagers had gathered to syphon off petrol.
Both German and US officials have tried to deflect blame.
Franz Josef Jung, Germany's defence minister, said the Taliban's possession of the two tankers "posed an acute threat to our soldiers".
German officials have said the tankers might have been used as suicide bombs.
Rocket attack
Angela Merkel, Germany's chancellor, has called for a "thorough and quick" Nato investigation into the incident.
Merkel and Gordon Brown, the UK prime minister, have also called for an international conference on the future of Afghanistan to be held before the end of the year
"It should follow the work that is ongoing in all our countries to look at what is the best pathway forward for Afghanistan," Brown said in a joint press conference after talks with the German leader.
Meanwhile, on Monday, a rocket attack that struck a house in Kabul killed three members of one family and injured two others, officials said.
It was not clear where the rocket had been fired from.