About 1.9 million Kosovars, nearly half a million of whom live abroad, are registered to vote in the third election since Kosovo declared independence in 2008.
Polling stations opened at 7am (0500 GMT) and will close at 7pm
The new government will have to tackle unemployment running at 30% and improve relations with its neighbours, especially Serbia, a pre-condition for both countries to move forward in the European Union accession process.
The West sees the integration of the Western Balkan countries in the European Union as a way to stabilise a region still recovering from wars in the 1990s.
"Those who were in power should not come again, they are incriminated too much. They want to stay because they have created a lot of privileges for themselves," said Hasan Visoka, 62, after voting in a school in the capital, Pristina.
"Nothing will change. It doesn't matter who comes to power, we'll continue to be poor, without a future," said Arta Kelmendi, 28, after voting.
Early elections were called in May when the government of Prime Minister Isa Mustafa lost a no-confidence vote, accused by the opposition of failing to meet pledges to improve the lives of the youngest population in Europe.
Opinion polls put a coalition led by former prime minister Ramush Haradinaj as the frontrunner. His small Alliance for the Future of Kosovo (AAK) party signed a pre-election deal with the Democratic Party of Kosovo (PDK), the biggest in the country and in power since 2007.
A victory for Haradinaj, however, would probably complicate relations with Serbia, which has issued an international warrant for his arrest for war crimes.
A coalition led Mustafa's Democratic League of Kosovo (LDK) and the leftist opposition party Vetevendosje (VV), which wants to unite all Albanians in one state, are vying for second place in the vote, according to opinion polls.
In a calm election campaign, almost all political parties promised to boost economic growth to up to 8% a year and to raise public sector wages by up to 40%.
"These economic promises will not materialise without foreign investment or building new economic capacities that will lower unemployment," analyst Imer Mushkolaj said.
"Unemployment and poverty are the main problems in Kosovo's society."
Kosovo's economy has been growing steadily and is forecast to expand by about four percent in 2017 but the growth is mainly down to remittances from some one million Kosovars living abroad.
The new government will also have to try to strike a border demarcation deal with Montenegro, which is the last condition for the European Union to grant visa-free travel for Kosovars.
Neighbors Albania, Macedonia, Montenegro and Serbia have already secured visa-free travel with EU member states.
Kosovo declared independence in 2008, nine years after NATO bombing drove out Serbian forces accused of killing and expelling Kosovo Albanian civilians during a two-year counter-insurgency. Serbia still refuses to recognise its independence.