The centre-left SPD - having long languished in the shadow of the "Queen of Europe" - has been gripped by almost giddy optimism since poll ratings have jumped under its new leader, Martin Schulz.
Sunday's election will be held in one of Germany's smallest states - Saarland on the French border, with just one million people - but is seen as a bellwether ahead of September's national polls.
The SPD has gained around 10 points nationally since Schulz, the folksy and plain-spoken former European parliament president, took over in January with a social justice platform and a bold vow to end Merkel's almost 12-year-long reign.
The "Schulz mania" since has attracted especially young voters to the traditional workers' party and put it neck-and-neck with Merkel's conservative bloc, the current senior partner in a loveless right-left "grand coalition".
While Merkel long seemed unbeatable at the ballot box, she has been weakened by a populist backlash against her decision to open German borders to refugees which has brought a million asylum seekers since 2015.
This has given rise to the right-wing populist Alternative for Germany party which, despite a dip in popularity, is expected to enter the opposition benches of the 11th of Germany's 16 state assemblies Sunday.
But as the refugee crisis has abated, the campaign race is increasingly being fought along traditional ideological lines.
While Merkel broadly argues that Germany, the EU's export engine, is prosperous and needs to stay competitive to keep it that way, Schulz points to the army of "working poor" and promises to narrow a widening wealth gap.
'Send a signal'
In what has been dubbed a "super election" year, Germany faces two more state polls - in Schleswig-Holstein on May 7th, and North-Rhine Westphalia on May 14th - before the national general election is held on September 24th.
Saarland, though tiny, in some ways reflects the bigger economic challenges. The former coal region, where the last mine closed in 2012, has sought to establish itself as a research and IT hub.
Predominantly Catholic, the state named after the Saar River was occupied by France after World War II, and its people only voted to join what was then West Germany in the mid-1950s.
Since then it has been ruled by the CDU, alone or in coalition, except for the 1985-98 reign of former SPD premier Oskar Lafontaine.
This election is a race between two women - popular CDU state premier Annegret Kramp-Karrenbauer, 54, often dubbed simply "AKK", and her current deputy, the SPD's Anke Rehlinger, 40, who happens to hold the state record in shot put (16.03 metres).
In the home stretch of the campaign, Merkel will Thursday visit the small Saarland town of Sankt Wendel, a day before Schulz heads to the state.
Both sides want to boost their candidates after recent polls by public broadcasters painted a mixed picture.
A ZDF survey predicted a CDU lead of 37-32 percent over the SPD, but an ARD poll forecast only a 35-34 percent edge for the conservatives.
The SPD's hope for power, in the state and perhaps nationally, would be to join forces with the far-left Linke and ecologist Greens parties - a constellation known as red-red-green.
Lafontaine - the former premier and federal finance minister, who has since switched to the Linke party - has campaigned for a leftist coalition with posters that promise "We've paid enough - now it's the turn of the rich".
A victory for the left in Saarland would "send a signal," said news weekly Der Spiegel. "And it would make red-red-green more likely at the national level."
By Frank Zeller