Nearly six million Italians are eligible to vote in mayoral contests in 90 towns and six provinces, but the focus is squarely on the main battlegrounds of the financial capital Milan and the southern port of Naples.
Results are expected after voting ends at 1300 GMT.
Berlusconi suffered a drubbing in the first round of voting on 15-16 May, when an uninspired centre left easily held on to power in Turin and Bologna and forced the centre right into run-offs in Naples and Milan, its longtime stronghold.
The stakes are high. Defeat in his hometown of Milan would be a serious blow for a premier already weakened by a series of sex scandals, corruption trials and a sluggish economy.
A loss would almost certainly deepen a rift with his main ally, the Northern League, and could provoke challenges to his otherwise unquestioned leadership of the centre right.
The shock first round result had already set tongues wagging that Berlusconi's dominance of Italian politics for nearly two decades may be nearing its end - though the media magnate has confounded such predictions many times before.
In Milan, where Berlusconi made his business fortune and launched his political career, outgoing centre-right mayor Letizia Moratti trailed with 41.6% of the first-round vote against leftist Giuliano Pisapia's 48%.
"I'm hoping this vote will bring a change for Milan, an improvement," said salesman Bruno Pedrazzoli, 53, after casting his vote in Milan when polls opened on Sunday. He complained of high pollution and patchy public transport in the city.
'Islamic Gypsyland'
A flailing economy is also weighing on voters. Italy has been one of the euro zone's most sluggish economies for more than a decade, with more than a quarter of its youth unemployed and the average Italian poorer than he or she was 10 years ago.
Berlusconi's government last month was forced to trim its growth forecast for the year to 1.1% from 1.3% and cut next year's outlook to 1.3% from 2.0%. Earlier this month ratings agency Standard & Poor's lowered its outlook on Italy for failing to cut its debt mountain and boost growth.
After being punished for initially characterising the vote as a referendum on his popularity and policies, Berlusconi has since blanketed the airwaves with trademark tirades against his longtime enemies: the left and "communist" magistrates.
Milan will become an "Islamic gypsyland" if the left wins, he predicted. Leftist voters lacked a brain anyway, he said, prompting Internet spoofs and a lawsuit from an offended voter.
A rant against Italian magistrates to a surprised US President Barack Obama at the Group of Eight summit in Deauville, France prompted Economy Under-secretary Daniela Melchiorre, a former magistrate, to resign in protest.
(EurActiv with Reuters.)
