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The general election next March will be the first since a disputed poll in 2007 that set off a politically based ethnic slaughter in which more than 1,200 people were killed.
"We urge that the nation come together and prepare for elections which will be a real model for the entire world," Clinton told reporters in Nairobi.
She met President Mwai Kibaki, who is barred by law from seeking a third term, and Prime Minister Raila Odinga, who leads in opinion polls in the race to replace him.
The two were the main rivals in the disputed presidential poll, when then opposition leader Odinga accused Kibaki of stealing the vote.
Gangs faced off with machetes and clubs, and security forces opened fire on the streets, until mediator Kofi Annan brokered a power-sharing pact between Kibaki and Odinga that ended the violence and made Odinga prime minister.
Before meeting with members of Kenya's election commission, Clinton told reporters that in her talks with Kibaki she had stressed "the importance of the importance of a credible, transparent, free and fair election process."
Clinton warned of the cost of another botched election, urging the government and civil society to work together.
"On the other hand the unrest that can result from a disputed election has a terrible cost both in lives lost and in economic impact," she said.
"The instability that followed the last election cost the Kenyan economy by most estimates more than one billion dollars."
Launching a seven-nation Africa tour in Senegal on Wednesday, Clinton urged Africa to recommit to democracy, declaring the "old ways of governing" can no longer work on a continent with strong economic growth and an increasingly empowered citizenry.
She also met Somali President Sheikh Sharif Ahmed and other Somali leaders in Nairobi, and will visit Malawi and South Africa.
Clinton's trip to Africa is intended in part to strengthen US security ties with allies such as Kenya, the economic powerhouse of eastern Africa, in the face of growing threats from Islamist militants.
A statement from the Kenyan presidency said Clinton had "appreciated the frontline role" Kenya continued to play to stabilise Somalia and the Horn of Africa, and had promised her government's support for such initiatives.
Nairobi has blamed a series of bomb and other attacks in Kenya on Somalia's al Qaeda-linked al Shabaab, which has threatened to retaliate since Kenyan troops pursued the Islamists into Somalia in October.
Clinton said she was encouraged by progress since Kenya adopted a new constitution in August 2010, which granted the judiciary "significant responsibilities".
She made the remarks after meeting Chief Justice Willy Mutunga, a former law school lecturer with a track record of pushing for legal reform.
Mutunga has won praise for restructuring the courts since taking over in June last year, including firing corrupt judges and setting up a special team of judges to handle election disputes well ahead of next year's presidential election.
Analysts say the crisis over the 2007 election was made considerably worse by the parties' refusal to take disputes to the courts, which were widely seen as inefficient and corrupt.
The fighting led to prosecutions of prominent Kenyan political figures, including two presidential hopefuls, by the International Criminal Court.
Clinton urged the elections body to ensure the votes and aspirations of the people were reflected accurately and fairly.
The commission is currently mired in a crisis over its decision to abandon plans to introduce an electronic register of voters after the tendering process descended into acrimony.
"When you lose an election and when your supporters see you lose an election, its important that they have to see that the process was fair. And that's what we hope for here for our friends in Kenya," said Clinton.