The right-wing populist Alternative for Germany (AfD) party has mobilised xenophobic and anti-Islam sentiment to win opposition seats in nine out of 16 states in Germany and is especially strong in the ex-communist east.
Fresh gains in long-divided Berlin -- where the AfD has polled 14 percent, a year ahead of national elections -- would spell another setback for Merkel, whose open-door policy brought one million asylum-seekers to Germany last year.
More than 70,000 of them came to Berlin, most still housed in refugee shelters including the cavernous hangars of the Nazi-built former Tempelhof airport, once the hub for the Cold War-era Berlin airlift.
Merkel -- who was booed with "get lost" cries by right-wing activists at a campaign event with her party's candidate Frank Henkel this week -- conceded that it was hard to reach the "protest voters" who have turned their backs on mainstream parties.
And still we have to try, again and again, because I think we must not give up on people who are casting protest votes," she said on RBB Berlin public radio.
On Saturday, in another tacit acknowledgement of the negative reaction to her migrant policy among some voters, she said she wanted to drop her "we can do it" rallying cry, much used last year to illustrate her welcoming stance on migrants.
"It's become a simple slogan, an almost meaningless formula," she told the Wirtschaftswoche financial weekly in an interview, adding: "Some feel provoked (by the expression) which of course was not the idea."
A strong showing for the AfD -- which was founded, originally as a eurosceptic fringe party, just over three years ago -- would hurt all major parties and continue a long-term fragmentation of the political spectrum.
Merkel's centre-right Christian Democrats (CDU) have a national majority but in Berlin serve as junior coalition partners to the centre-left Social Democrats (SPD) of Mayor Michael Mueller, traditionally the strongest party in the city of 3.5 million.
As Mueller has said he does not want to stay in a coalition with the CDU, Merkel's party may be cast out of the Berlin government altogether while the SPD instead teams up with the ecologist Greens and the far-left Die Linke party.
In a city famously dubbed "poor but sexy" by its previous mayor, the openly gay bon vivant Klaus Wowereit, the election campaign has been dominated not just by migrant policies but also widespread frustration over poor public services.
With little industry and an above the German average jobless rate of 10 percent, Europe's techno party capital is chronically broke and known for its crumbling schools, late trains and shambolic city offices.
Often seen as an amusingly chaotic exception in an otherwise orderly and punctual Germany, Berlin became a national laughing stock for a grand airport project that is now five years behind schedule and three times over budget.
A shortage of affordable housing has also become a hot-button issue as property prices and rents have shot up with an influx of 50,000 newcomers every year.
The top candidate meant to fix the mess is the SPD's Mueller, 51, who took over mid-term from Wowereit almost two years ago and is now seeking a popular mandate.
His main opponent is the CDU's Henkel, 52, who is running on a law-and-order platform that has seen mass police raids against anti-capitalist squatters, promises to clear streets and parks of drug dealers and demands to equip police with stun guns.
As the election has neared, the rise of the AfD has come to the fore again as a top concern, with Henkel telling the hecklers this week that "I can't stand a party that tolerates racists in its leadership".
The AfD, breaking a taboo in post-war German politics, has an openly anti-immigration platform, similar to France's National Front or far-right populists in Austria and the Netherlands.
It has also tapped into popular frustration with the two major parties, the CDU and SPD, who -- from Berlin's glass-domed Reichstag building -- rule Germany in a "grand coalition" with a crushing majority.
Mueller issued a passionate plea for voters to reject politicians with a "worldview that is misanthropic and racist through-and-through".
"Berlin overcame the Wall and shoot-to-kill orders and learnt the right lessons from a cruel history of suffering, persecution, terror and war," he wrote. "Berlin today is the capital of freedom."
He urged the city to "once again take charge of its fate and prevent history from repeating itself."
Polls opened in Berlin at 0600 GMT and are due to close 10 hours later.