Voting opened at 9 a.m. (0700 GMT) and will close at 8 p.m. (1800 GMT), when exit polls will be released.
The final result is expected to be decided by fewer than a million votes and fewer than 10 seats in the 350-seat parliament, experts say.
Opinion polls show the election will likely produce a win for Alberto Nunez Feijoo's centre-right People's Party, but to form a government it will need to partner with Santiago Abascal's far-right Vox.
This would be the first time a far-right party entered government since Francisco Franco's dictatorship ended in the 1970s.
The postal service reported on Saturday that postal votes had set an all-time record of 2.47 million, as many people choose to cast their ballot from the beach or mountains.
Persons:
Pedro Sanchez's, Sanchez, Alberto Nunez Feijoo's, Santiago Abascal's, Francisco Franco's, Feijoo, Jessica Jones, Nick Macfie, Frances Kerry
Organizations:
Socialists, People's Party, Barclays, Socialist, PSOE, European Union Council, Thomson
Locations:
MADRID, Catalonia, Galicia