The outgoing speaker defeated opposition veteran Ahmed Al Saadun, who himself has served in the post three times before.
Saadun received 28 votes against Khorafi's 36 that appear to have included the votes of the 16 cabinet ministers who are ex-officio members of parliament. One vote was left blank.
Soon after the result was announced, spectators in the jam-packed gallery called out Saadun's name and some of them accused Khorafi of being a "rubber-stamp" speaker.
"You were the one who expelled us from parliament," a young activist, wearing an orange banner, shouted at Khorafi after he sat down in the speaker's chair.
In a brief speech interrupted by loud applause, Saadun vowed to continue to fight corruption and to work for the approval of election reforms.
Prime Minister Sheikh Nasser Mohammed Al Ahmed Al Sabah extended a hand to the assembly, saying in the inaugural session that the 16-member cabinet "stresses its sincere wish to cooperate positively."
"We should realize that we will not achieve anything if cooperation between the legislative and executive authorities did not rise up to the responsibility," he said.
He also called for "new tools and practical means ... to avoid crises" between the two authorities.
Kuwait's parliament was dissolved in May and early elections were called following a bitter standoff between the legislative and execute over an election reform bill.
Emir Sheikh Sabah Al Ahmed Al Sabah, who inaugurated the parliament, called for "a comprehensive revision of the past and for an earnest cooperation" between the government and parliament.
Kuwait's new cabinet was sworn in on Tuesday and immediately offered an olive branch to the opposition after their triumph in polls last month by approving the electoral reform bill that it had championed.
The new law will slash the number of constituencies from 25 to five as demanded by opposition MPs in a bid to reduce what they charge has been rampant vote-buying under the old electoral boundaries.
The bill was recommended in April by a ministerial committee but was rejected by Kuwait's previous cabinet that instead insisted on retaining 10 constituencies.
MPs were expected to discuss the bill later on Wednesday.
Saadun's defeat showed that the Kuwaiti opposition, which scored a resounding victory in the June 29 legislative elections, in which women voted for the first time, was not united on all issues.
The opposition is a loose alliance of Islamists, liberals, nationalists, and independents who have come together in the polls to fight for election reforms and combat corruption.
Islamist MP Mohammed Al Busairi defeated another opposition lawmaker Saleh Al Fadhalah for the post of deputy speaker.
© 2006 Agence France-Presse
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