He faces up to five years in jail and a 45,000 euro ($66,000) fine if convicted of "complicity in slander, complicity in the use of forgeries, dealing in stolen property and breach of trust".
'High political drama'
Patrice de Beer, political analyst and former senior editor at Le Monde, said Villepin is hoping to portray himself as a victim of abuse of power.
"He wants to turn the tables. He's sitting in the docks and he wants to look like the victim, portraying the man who is suing him as a political killer.
"In the French law the president is immune from prosecution, but he can sue. At the same time he is the head of the judiciary.
"So this will be Villepin's crusade against victimisation from power," he said.
Tim Friend, Al Jazeera's correspondent in Paris, said high political drama is expected to be seen in the court, where about 40 other political and business figures are listed as plaintiffs in the same case.
"This whole saga has taken so many twists and turns, it's reminiscent of a rather pacy political thriller. Some of it frankly is quite unbelievable.
"He strode into court in a smart blue suit, his family around him, clearly trying to get public sympathy against his bitter rival president Sarkozy," he said.
The case centres on a list - later proved to have been fabricated - of account holders at the Clearstream financial clearing house who allegedly received kickbacks from the sale of French frigates to Taiwan.
One name on the bogus list was that of Sarkozy, the then finance and interior minister, who suspects Chirac's chosen heir, Villepin, of using the list to try to torpedo his bid for presidency.
"[Villepin is] sitting in the docks and he wants to look like the victim, portraying the man who is suing him as a political killer"
Patrice de Beer,
Villepin has repeatedly denied any wrongdoing and maintains that the case would have never gone to trial had it not been for Sarkozy's "meddling" in the judicial process.
The trial is shaping up as a showdown between the two men, whose mutual hatred is legendary in French political circles.
In the weeks leading up to the trial, Villepin has waged a media offensive, accusing Sarkozy of being "a bit twisted" for insisting that the Clearstream affair was a plot to sabotage his bid for the presidency.
Sarkozy reportedly vowed to "hang up whoever did this on a butcher's hook".
"Some day, he will have to explain his relentlessness," Villepin said last week. "This is not without consequences for the office of president, on the human and political level."
The proceedings will also cast light on the murky dealings of French intelligence and of one of the world's top aerospace companies, EADS.
A former EADS vice-president and Villepin ally, Jean-Louis Gergorin, is also on trial as is the former head of an EADS research centre, Imad Lahoud, who has reportedly confessed to falsifying the list.
Also on trial are management consultant Florian Bourges, accused of stealing Clearstream documents, and journalist Denis Robert, who broke the story.
General Philippe Rondot, a former intelligence official whose notes - seized by investigators - detail secret meetings that appear to incriminate Villepin, is to testify early next month.
Chirac's name came up at the outset in connection with the Clearstream case, but he was never formally investigated, has denied all knowledge of the affair and has not been called to testify.
Villepin's trial comes five years after another prime minister, Alain Juppe, was convicted of corruption in an illegal party financing scheme and given a 14-month suspended sentence and a one-year ban on holding public office.
The hearings are scheduled to run until October 23 at the same Paris criminal court where Marie Antoinette, the French queen, was sentenced to the guillotine in 1793 during the French Revolution.