Voters will chose members of a 47-seat national assembly or lower house of the parliament in Monday's election, which has been declared a national holiday.
Bhutan's transformation towards a democratic constitutional monarchy was started by the Jigme Singye Wangchuck, the former king of Bhutan.
He handed over daily administration to a council of ministers in 2001, before stepping down in December 2006.
Reporting from Bhutan's capital, Thimpu, Al Jazeera correspondent Tony Birtley said that despite the royal seal of approval, many Bhutanese have not been enthusiastic about democracy.
"People here don't want democracy. They are happy with the monarchy," he said.
The introduction of democracy is designed to ensure the continued popularity of Bhutanese monarchy and avoid a repeat of unrest that shook the nearby kingdom of Nepal two years ago.
Sandwiched between India and China, Bhutan is known by its people as Druk Yul, the Land of the Thunder Dragon
Election sees 318,465 voters eligible to vote in 47 constituencies
Only two parties allowed to contest elections: The People's Democratic Party promises "service with humility" while the Druk Phuensum Tshogpa says it stands for "growth with equity and justice"
In January and December voters elected 20 members of a 25-member National Council meant to act as an upper house of parliament. Five remaining members are chosen by the king
A popular revolt in Nepal in April 2006 forced King Gyanendra from power and stripped away his wide-ranging regal powers.
After Monday's election, Bhutan's 28-year-old, Oxford-educated monarch will remain head of state and the two political parties standing have stuck closely to the king's vision.
Both the People's Democratic Party (PDP) and the Druk Phuensum Tshogpa (DPT) have candidates that served as prime ministers under royal rule.
The PDP's main election slogan has been to work for the "well-being of everyone" while the DPT says it is committed to "growth with equity and justice".
Both promote Gross National Happiness (GNH), the king's all-encompassing political philosophy that seeks to balance material progress with spiritual well-being.
The isolated kingdom has remained wary of embracing the consumerist trappings of the modern world, only allowing the entry of the internet and television in 1999.
Officials said they expected a more than 70 per cent turnout after tepid responses in last year's mock polls to familiarise voters with the process.
"The political parties have put immense pressure on people to vote. So they will turn up in huge numbers," said chief election commissioner Kunzang Wangdi.
|Bhutan has maintained a traditional |
way of life for centuries [AFP]
People can cast their vote only in their home towns so thousands took leave to go to their remote villages.
Kuldip Nayar, an Indian political commentator on South Asian affairs, said the vote signalled only a limited move towards democracy.
"The feeling is that Bhutan is going to stay a monarchy in the garb of democracy," he said.
"There are thousands of Bhutanese outside Bhutan who have not been allowed to come in. They are in Nepal, they are in India.
"The electoral rolls have [also] bee very selective. It is, you could say, a move from a monarchy to a very limited democracy."
The results of the vote are expected on Tuesday morning.