An estimated 46,499,537 people are entitled to take part in the vote - a record number for a UK poll. Polling stations opened at 07:00 local time and will close at 22:00.
Opinion polls have suggested that while big business is broadly in favour of staying in the EU, small firms have been evenly split in what looks like a photo-finish with one poll showing "Remain" at 45 per cent and "Leave" 44 per cent, with 11 per cent undecided.
Prime Minister David Cameron on Wednesday made a last-minute plea to British voters not to give up the "best of both worlds" by voting to remain in the EU.
Leading 'Brexit' backer Boris Johnson, a former London mayor who is widely touted as a future prime minister, insisted the "Leave" campaign was on the brink of victory.
Immigration to Britain, which has risen significantly in recent years, has been a key issue that has seriously divided the country.
It is only the third nationwide referendum in UK history and comes after a four-month battle for votes between the "Leave" and "Remain" campaigns.
The referendum ballot paper asks the following question: "Should the United Kingdom remain a member of the European Union or leave the European Union?"
Whichever side gets more than half of all votes cast is considered to have won. The weather forecast for polling day is mixed as a rain-swept nation votes.
After the referendum polls close, sealed ballot boxes will be collected and transported to the count venue for each of the 382 local counting areas, the BBC reported.
These represent all 380 local government areas in England, Scotland and Wales, plus one each for Northern Ireland and Gibraltar.
Individual areas' results will then be declared throughout the night, along with results from 11 regional counts.
Depending on how close the poll is, the result may become clear before the final national result is officially declared by the Chief Counting Officer, who will be based at Manchester Town Hall.
The Electoral Commission estimates a final result "around breakfast time" on Thursday.