Polling stations opened their doors at 7am (06:00GMT) on Sunday and were expected to close 12 hours later.
More than 1.8 million people are eligible to vote in the polls that are being closely watched by the European Union which brokered a landmark deal in April between the Kosovo leadership and Serbia to improve their relations.
The deal with Kosovo had helped Serbia secure the green light to begin EU membership talks with Brussels.
The polls are the first in which Serbs are taking part after Kosovo declared independence from Serbia in 2008. Serbia does not recognise Kosovo.
Voters are electing mayors and councillors for 36 municipalities on a four-year mandate.
Out of the total of 103 electoral lists, 38 are Albanian, 33 Serb, the rest being lists of independent candidates, then Bosniaks, Turks, Roma, Montenegrins, Croats, Gorani and Ashkali.