Members started voting islandwide from 8 am (midnight GMT), with polling stations due to close at 4 pm. The China-sceptic DPP has more than 140,000 eligible members.
Tsai Ing-wen, who resigned as DPP leader in 2012 after losing the presidential election to the Kuomintang's Ma Ying-jeou, is expected to overwhelm her rival Kuo Tai-ling.
The new leader's first test will be the November mayoral elections in Taipei and five other cities which make up 60 per cent of the island's eligible voters.
Voters who re-elected Ma in January 2012 endorsed the Beijing-friendly policies he has pursued since he took office in 2008.
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Since then, leading DPP members have debated whether their party should adjust its wary policy towards China given its fast-expanding regional and global influence.
Tensions between Taiwan and China grew in the eight years to 2008 under then-president Chen Shui-bian of the DPP.
They have eased markedly since then.
China and Taiwan have been ruled separately since the end of a civil war in 1949.