Monday's vote asks the majority Muslim population whether they back a plan by separatists and the government to create a new self-administered region known as Bangsamoro.
The Bangsamoro Organic Law is the product of years of peace negotiations between the government and the Moro Islamic Liberation Front (MILF), the largest Muslim rebel group in the country.
MILF has fought for decades against the Philippine army for greater autonomy and control over the island's natural resources, CNN Philippines reported.
The formation of a new Muslim autonomous region could bring a peaceful resolution to the protracted conflict, which has claimed more than 120,000 lives since the 1970s.
President Rodrigo Duterte, who was mayor of the Mindanao city of Davao before he took office, formally signed the Bangsamoro Organic Law in July 2018.
If the public ratify the law, the landmark legislation will abolish the current Autonomous Region in Muslim Mindanao (ARMM) to make way for the creation of a new autonomous Bangsamoro region, according to CNN Philippines.
As part of the deal, the central government will transfer some powers to the new Bangsamoro government, which will see increased government funding and greater control over natural resources. The MILF is expected to become a political force and have a majority presence in the transitional government until elections in 2022.
The referendum will ask voters in some parts of Mindanao whether they back the law and determine the areas that would make up the new region.
Voters in ARMM, Isabela City in Basilan and Cotabato City are voting Monday. If the plan is approved, a second vote will be held in Lanao del Norte, North Cotabato and 28 other areas on February 6.
As he was casting his vote in favor of the law, MILF leader Al Hajj Murad Ebrahim told CNN Philippines, "It's my first time to exercise my right to vote. It is now start of commencement of transition of revolutionary to governance."
Final results are expected on Friday. Reuters reports that the law is likely to be overwhelmingly approved.
History of terror
Mindanao, a province in the far south of the Philippines at the borders of Malaysia and Indonesia, has long been plagued by terrorism and unrest.
It is home to several Islamist insurgent groups, including Abu Sayyaf, which has been blamed for a number of attacks on civilians and Philippine government troops, as well as the kidnapping of several foreign nationals.
As recently as December 31, two people were killed in an explosion outside a busy shopping mall in Cotabato City.
In July, at least 10 people were killed when militants linked to Abu Sayyaf struck a military checkpoint with a car bomb.
Abu Sayyaf -- along with the Maute group, another Mindanao-based terror organization -- was responsible for the invasion and occupation of Marawi, the country's biggest Muslim-majority city, in 2017.
The ISIS-affiliated militants laid siege to Marawi for five months, and the violence forced more than 350,000 residents to flee the city and the surrounding areas, as their homes were reduced to rubble by airstrikes and militant fire. In the 150 days of the Philippine army operation to flush the militants out, more than 800 militants and 162 members of the government security forces were killed.
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