New Caledonia currently has special status as a French overseas territory with decision-making powers over tax, labour laws and trade but not for defence nor foreign policy.
The election will open the last mandate of the Congress of New Caledonia under the terms of the 1998 Noumea Accord, agreed between French loyalists and independence supporters after unrest in the 1980s in which 70 people are thought to have died.
It is supposed to lead to the progressive decolonisation of the territory, including successive competence transfers from the French State to the local authorities.
In the outgoing congress independence supporters held 23 of the 54 seats and they are forecast to win more seats in Sunday's election.
Independence supporters are mostly drawn from the Melanesian Kanak community, which makes up around 40 per cent of New Caledonia's 265,000 residents.
For their opponents, leaving France means economic ruin.
If local politicians fail to agree a date for the referendum between 2014 and 2018, Paris will organise it for 2018.