State TV said polling stations opened their doors to voters on Friday and could be remain open until as late as midnight.
The final result will be announced on Saturday, although initial figures may come out sooner.
The run-off follows a June 28 ballot with historic low turnout, when more than 60 per cent of Iranian voters abstained from the snap election for a successor to Ebrahim Raisi, following his death in a helicopter crash.
A triumph by the moderate Masoud Pezeshkian might promote a pragmatic foreign policy. (AP PHOTO)
The low participation is seen by critics as a vote of no confidence in the Islamic Republic
The vote is a tight race between low-key Masoud Pezeshkian, the sole moderate in the original field of four candidates, and hardline former nuclear negotiator Saeed Jalili.
While the poll will have little impact on the Islamic Republic's policies, the president will be closely involved in selecting the successor to Ayatollah Ali Khamenei, Iran's 85-year-old supreme leader who calls all the shots on top state matters.
"I have heard that people's zeal and interest is higher than in the first round. May God make it this way as this will be gratifying news," Khamenei told state TV after casting his vote.
Khamenei acknowledged on Wednesday "a lower-than-expected turnout" in earlier voting, but said "it is wrong to assume those who abstained in the first round are opposed to the Islamic rule".
A win by Saeed Jalili could bring even more antagonistic domestic and foreign policy. (AP PHOTO)
Voter turnout has plunged during the past four years, which critics say shows support for the system has eroded amid growing public discontent over economic hardship and curbs on political and social freedoms.
Only 48 per cent of voters took part in the 2021 election that brought Raisi to power, and turnout was 41 per cent in a parliamentary election in March.
The election coincides with escalating regional tension due to the war between Israel and Iranian allies Hamas in Gaza and Hezbollah in Lebanon, as well as increased Western pressure on Iran over its fast-advancing nuclear program.
The next president is not expected to produce any major policy shift on Iran's nuclear program or change in support for militia groups across the Middle East, but he runs the government day-to-day and can influence the tone of Iran's foreign and domestic policy.
The rivals are establishment men loyal to Iran's theocratic rule, but analysts said a win by anti-Westerner Jalili would signal a potentially even more antagonistic domestic and foreign policy.
Voter turnout in Iran has plunged in recent years amid worsening economic and social conditions. (AP PHOTO)
A triumph by Pezeshkian might promote a pragmatic foreign policy, ease tensions over now-stalled negotiations with major powers to revive the nuclear pact, and improve prospects for social liberalisation and political pluralism.
However, many voters are sceptical about Pezeshkian's ability to fulfil his campaign promises as the former health minister has publicly stated that he had no intention of confronting the powerful security hawks and clerical rulers.
Many Iranians still have painful memories of the handling of nationwide unrest sparked by the death in custody of a young Iranian-Kurdish woman Mahsa Amini in 2022, which was quelled by a violent state crackdown involving mass detentions and even executions.
Both candidates have vowed to revive the flagging economy, beset by mismanagement, state corruption and sanctions reimposed since 2018 after the US ditched Tehran's 2015 nuclear pact with six world powers.
