Long queues have formed at polling centres with turnout likely to match the 67% recorded in the first round last week, reports say.
The polls are seen as a referendum on the popularity of Narendra Modi, who has ruled the state since October 2001.
Mr Modi has been tipped as a potential future prime minister.
Under his leadership, Gujarat has been turned into one of India’s economic powerhouses.
Nearly 40 million people are eligible to vote in 182 assembly constituencies in the state.
Votes are being held in 95 of these constituencies during the second phase of polls on Monday. Counting is set for Thursday.
Voting is taking place in central and north Gujarat, Ahmedabad city area, and in Kutch district.
Mr Modi was among the early voters in the state on Monday.
His Hindu nationalist Bharatiya Janata Party (BJP), which has governed the state for 15 years, is facing a Congress party challenge in the election.
Mr Modi is also seen as India’s most divisive politician.
He was chief minister of the state during the 2002 religious riots when more than 1,000 people, mostly Muslims, were killed.
He was accused of doing little to stop the riots and in subsequent years the US denied him visas.
In October the UK’s high commissioner in India, James Bevan, met Mr Modi, ending a 10-year boycott of the controversial leader.