Error: Field Close_Reason__c is a picklist field. Picklist fields are only supported in certain functions.

Hello Mano,

Try this out

AND(
ISPICKVAL(StageName, "Closed Lost",
ISBLANK(TEXT(Close_Reason__c))
)

or

AND(
ISCHANGED(StageName),
ISPICKVAL(StageName, "Closed Lost",
ISBLANK(TEXT(Close_Reason__c))
)

or

AND(
ISPICKVAL(StageName, "Closed Lost",
ISPICKVAL(Close_Reason__c,"")
)

or 

AND(
ISCHANGED(Stagename),
ISPICKVAL(StageName, "Closed Lost",
ISPICKVAL(Close_Reason__c,"")
)