Renzi, 42, resigned as prime minister in December after Italians overwhelmingly rejected a constitutional referendum.
A centrepiece of his political platform, the reform had aimed to streamline Italy's parliamentary system.
In the aftermath of the December vote and facing a rebellion from the left wing of his centre-left party, Renzi in February stepped down as party leader with the aim of regaining legitimacy in a future vote.
Renzi on Sunday faces two candidates considered further to the left: Justice Minister Andrea Orlando and Michele Emiliano, who heads the southern Puglia region.
An internal vote conducted by the party earlier this month suggests Renzi could win hands down: he had more than a majority at 66.7 percent, with 25.3 percent for Orlando and eight percent for Emiliano.
Crowning of Renzi
Lorenzo De Sio, a professor of political sociology at the Luiss University in Rome said Renzi's legitimacy will hinge on voter turnout.
"Rather than a competition, we are facing the legitimisation, a sort of crowning of Renzi as leader of the PD. We can expect a huge Renzi victory but with weak voter turnout. People on the left do not seem to be mobilised," he says.
"If participation rates are around a million people or less, the legitimisation of Renzi won't be strong, if it is between 1.5 and two million, he will wind up in a stronger position," he adds.
The winner of the vote will lead the party during legislative elections slated for spring 2018 unless parliamentarians come to agreement on electoral reform before then and call for early elections.
During the only televised debate between Renzi and his two competitors, the former prime minister said he would do "everything to bring back energy, momentum and vigour to the country", and railed against "stagnation that seems to be blocking the political and institutional life" since the referendum.
In addition to the contrasting styles, with Orlando and Emiliano generally more reserved than the exuberant Renzi, the debate laid bare key differences over national politics.
Renzi disagrees with his two challengers on a wealth tax, which he opposes.
If the spring election outcome requires the formation of a coalition following the legislative elections, Orlando and Emiliano have said they would seek to govern with left wing defectors or other parties on the left.
Renzi, meanwhile, has not ruled out forming an alliance with centre-right Silvio Berlusconi.
Voting booths, mainly stands on the streets, are set to open at 8:00 am and close at 8:00 pm on Sunday.
The vote is open to all Italians over 16 years, EU citizens residing in Italy and foreigners from outside the EU holding valid residency permits provided they pay a donation of at least two euros.
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