Khelif, whose participation in the Games was permitted by the IOC and had divided boxers, landed multiple punches in the first 30 seconds before a powerful right to Carini's nose prompted the Italian to raise her hand and return to her corner.
Her coach signalled she was withdrawing from the women's welterweight round of 16 bout.
A distraught Carini fell to her knees in the ring, sobbing and declining to shake Khelif's hand after the referee declared the Algerian the winner.
"I am a fighter. My father taught me to be a warrior. When I am in the ring, I use that mindset, the mindset of a warrior, a winning mindset," Carini told reporters after abandoning the bout.
"This time I couldn’t make it."
Khelif and Taiwan's double world champion Lin Yu-ting were cleared to fight in Paris after the IOC last year stripped the IBA of its status as boxing's governing body over governance issues, and took charge of the Paris 2024 boxing competition.
Both had been disqualified at the 2023 World Championships after failing International Boxing Association (IBA) eligibility rules that prevent athletes with male XY chromosomes competing in women's events.
The IOC's Framework on Fairness, Inclusion and Non-discrimination on the basis of gender identity and sex variations, offers guidelines to federations on ensuring inclusion and fairness in sport, including athletes with Differences of Sexual Disorder (DSD).
DSD are a group of rare conditions involving genes, hormones and reproductive organs. Some people with DSDs are raised as female but have XY sex chromosomes and blood testosterone levels in the male range.
Ahead of Khelif's bout, IOC spokesman Mark Adams defended the body's decision for Paris 2024.
"This involves real people and we are talking about real people's lives here," he told reporters on Thursday.
"They have lost and they have won against other women over the years."
IBA Chief Executive Chris Roberts, whose organisation's relationship with the IOC has soured, was disappointed for Carini.
"These two boxers are not allowed to box within IBA. So I find it remarkable how the IOC applies a different condition to this event," he said.
Khelif described the bout as difficult.
"Insh’allah for the second fight. I am very prepared because it’s been eight years of preparation," she told reporters. "I need an Olympic medal here in Paris."
Women's sports categories exist in most sports in recognition of the clear advantage that going through male puberty gives an athlete. That advantage is not just through higher testosterone levels but also in muscle mass, skeletal advantage and faster twitch muscle.
British author JK Rowling, who has become an outspoken figure on the definition of what it is to be a woman, said Carini's dreams had been shattered by unjust rules.
"A young female boxer has just had everything she’s worked and trained for snatched away because you allowed a male to get in the ring with her," Rowling wrote on X.
"#Paris2024 will be forever tarnished by this brutal injustice," she added.
Italy's right-wing Prime Minister Giorgia Meloni said Carini's bout against Khelif was not a fight among equals.
"I think that athletes who have male genetic characteristics should not be admitted to women's competitions," Meloni was quoted as saying by Italian news agency ANSA.
"And not because you want to discriminate against someone, but to protect the right of female athletes to be able to compete on equal terms."
Hungarian boxer Luca Anna Hamori, next to face Khelif in the ring, said she was not scared.
"I will go to the ring and I will get my win. I trust my coaches and I trust myself," Hamori said.
Carini was left nursing shattered dreams.
"I'm out, my dream is over," she said. "So I felt really sad, with a broken heart. It's not right for my Olympics to end here, it's not right for my dream to end here, because an athlete makes so many sacrifices.
"I'm not ashamed to say that I gave up, I'm not even afraid to go back to that ring."
