Surveys suggest Merkel's conservative CDU/CSU alliance has a double-digit lead over its nearest rivals, the centre-left Social Democratic Party (SPD) led by Martin Schulz.
Polling stations opened at 0600 GMT in Europe's top economy and will close at 1600 GMT.
With four other parties predicted to clear the five-percent bar to enter into the Bundestag, the highest number since the 1950s, it could take months of coalition wrangling before the next government takes shape.
Mainstream parties however have already ruled out talking to the anti-Islam, anti-immigration Alternative for Germany (AfD), which is polling at 11 to 13 percent and could emerge as Germany's third-strongest party.
Alarmed by the prospect of what Foreign Minister Sigmar Gabriel branded "real Nazis" entering the Bundestag for the first since the end of World War II, politicians used their final days of campaigning to urge voters to reject the rightwing populist AfD.
"This Alternative for Germany is no alternative. They are a shame for our nation," former European Parliament chief Schulz said at a rally on Friday.
The latest surveys put support for Merkel's conservative block at 34-36 percent, with the SPD trailing at 21-22 percent -- which would translate into a historic low for the party.
Despite bracing for a drubbing, Schulz was all smiles as he and his wife cast their ballot in his western hometown of Wuerselen.
Merkel, 63, whose campaign events were regularly disrupted by jeering AfD protesters, said at her final stump speech in the southern city of Munich that "the future of Germany will definitely not be built with whistles and hollers".
Observers say a strong showing by the AfD, which has capitalised on anger over the influx of a million migrants and refugees since 2015, will hit Germany like a bombshell.
"If the AfD becomes the leading opposition party, they will challenge key themes," said Thorsten Benner, director of the Global Public Policy Institute in Berlin. "It will very much change the tone of debate in parliament."
Aside from the populist noise, the past two months of campaigning have been widely criticised as lacklustre, with few hot-button issues dividing the main contenders.
Commentators say Merkel's reassuring message of stability and prosperity has resonated in greying Germany, where more than half of the 61 million voters are aged 52 or older.
Europe's most powerful woman appears all but assured of winning another term, matching the 16-year reign of her mentor Helmut Kohl.
Schulz on the other hand has struggled to gain traction with his calls for a more socially just Germany at a time when the economy is humming and employment is at a record low.
The SPD has also found it hard to shine after four years as the junior partner in Merkel's left-right "grand coalition", marked by broad agreement on major topics, from foreign policy to migration.
In the final stretch, the more outspoken Schulz told voters to reject Merkel's "sleeping-pill politics" and vote against "another four years of stagnation and lethargy".
Germany's best-selling daily Bild at the weekend said 61-year-old Schulz found his voice as he neared the finish line, and praised him for "fighting until the end".
"Germany doesn't just need a chancellor. It also needs an opposition leader. Schulz has started to sound like one," the newspaper wrote.
Undecided
The CDU and the SPD have signalled they aren't keen to continue their loveless marriage, and many rank-and file SPD members believe the traditional working class party would benefit from a stint in opposition to rekindle its fighting spirit.
This would leave the presumed winner Merkel in need of new coalition partners -- possibly the liberal and pro-business Free Democrats, who are hoping for a comeback after crashing out of parliament four years ago.
Another potential partner would be the ecologist and left-leaning Greens party, which, however, starkly differs with the FDP on issues from climate change to migration policy.
Pundits have pointed out that a significant number of voters remained undecided until the last minute, suggesting the final outcome could throw up some surprises depending on turnout.
In the western city of Frankfurt, 66-year-old Harald said he was still unsure who to vote for as he headed home from his night shift as a security guard in the leafy Westend suburb.
"I will make up my mind once I'm in the polling booth. You can forget about the AfD," he told AFP.
Facts and figures about Germany which votes Sunday
Germany, which is holding a general election on Sunday, is Europe's biggest economic power and the fourth largest in the world after the United States, China and Japan.
Here are some facts and figures about the country:
GEOGRAPHY: The Federal Republic of Germany is bordered to the north by Denmark, to the west by France, Belgium, the Netherlands and Luxembourg, to the south by Switzerland and Austria and to the east by the Czech Republic and Poland.
The country covers 357,050 square kilometres (137,850 square miles). The landscape rises from lowlands on the North and Baltic seas to the Bavarian Alps in the south. The biggest rivers are the Rhine, Elbe and Danube.
CAPITAL: Berlin, with 3.5 million inhabitants, is Germany's biggest city and the second biggest in the European Union after London.
POPULATION: The EU's most populous country, Germany had 82.8 million inhabitants at the end of 2016, including 10 million foreigners. Germany has the highest population of ethnic Turks outside Turkey, at about three million. It is one of Europe's most densely populated countries, at 232 people per square kilometre. With a low birth rate, the population is ageing and shrinking.
RELIGION: Christianity is the main religion in Germany, with a third of the country Protestants and a similar number Catholics. Other major religious groups in Germany include Muslims, who are estimated at 4.4 million and a Jewish population of 99,000.
HISTORY: Otto von Bismarck, the "Iron Chancellor", founded the German Empire in 1871 from many independent states, dominated by the Kingdom of Prussia.
After four years of bitter fighting, Germany suffered a devastating defeat in World War I and the humiliating conditions of the peace settlement contributed to the rise to power of Adolf Hitler and the Nazis in 1933.
Hitler unleashed the Holocaust and plunged Europe and the world into its bloodiest-ever conflict that resulted in the death of tens of millions of people and the division of Germany and Berlin into four zones, shared by the victorious powers - Britain, France, the Soviet Union and the United States.
Divided Germany became the key Cold War battleground between nuclear superpowers Russia and the United States, whose tanks faced each other across the Berlin Wall, which was finally and jubilantly torn down by people power in 1989. Germany was reunified in 1990.
POLITICAL INSTITUTIONS: Germany has two houses of parliament, the Bundestag (lower house) and Bundesrat (upper house, representing the 16 federal states).
The head of government or chancellor is now Angela Merkel, the leader of the centre-right Christian Democratic Union.
She has governed since 2005 and was re-elected in September 2009, ruling with Bavarian sister party the Christian Social Union and, in her second term, with junior partners the pro-business Free Democrats. She now leads a coalition with the Social Democratic Party as junior partners.
There is also a president, a largely symbolic head of state, currently Frank-Walter Steinmeier, a former foreign minister who was sworn in in March 2017.
Germany is a founding member of the European Economic and Monetary Union, launched in 1999, and was among the first 11 countries to physically use the euro currency on January 1, 2002.
ECONOMY: Germany is Europe's leading economic power and the world's second-largest exporter after China, mainly of vehicles, machinery, high-tech goods and chemicals. Big companies include auto makers Daimler, BMW, Volkswagen, Porsche and Audi and industrial conglomerates ThyssenKrupp and Siemens. The main financial centre is Frankfurt.
GDP: 3.134 trillion euros ($3.760 trillion) in 2016 or 48,839 euros per capita.
UNEMPLOYMENT: 5.7 percent in August 2017.
ARMED FORCES: The German armed forces had 178,304 personnel in June 2017. The constitution states they can be used only "for defensive purposes". The army requires parliamentary consent for any missions abroad. Conscription was ended in 2011.
