The heavily-guarded race track has been surrounded with layers of security to keep anti-government activists away.
On Saturday, protests intensified after the body of a Shia man killed in overnight clashes with security forces was discovered on a rooftop.
Many protesters want the race to be cancelled, but the government is determined it will go ahead.
Ahead of the race Bahrain's King Hamad al-Khalifa said that he was committed to reform in the kingdom.
"I also want to make clear my personal commitment to reform and reconciliation in our great country. The door is always open for sincere dialogue amongst all our people," he said in a statement.
His comments came after police fired tear gas to disperse thousands of protesters who took to the streets on Saturday. Many of them had gathered near the village where anti-government demonstrator Salah Abbas Habib's body was found.
British Foreign Secretary William Hague also called for restraint in dealing with protesters.
The race is due to start at 15:00 (12:00 GMT).
The protesters are demanding an end to discrimination against the majority Shia Muslim community by the Sunni royal family.
Armoured vehicles are patrolling the streets to clamp down on any demonstrations ahead of Sunday's race.
Formula 1's governing body, the FIA, only went ahead with the Grand Prix after the government said it had security under control.
Last year's Bahraini Grand Prix was cancelled after 35 people died during a crackdown on mass demonstrations calling for greater democracy.
The Bahraini government, headed by the al-Khalifa dynasty, had been keen for this year's race to go ahead to prove it had put the 14-month uprising behind them.
BBC correspondent Caroline Hawley says that staging the event has had the opposite effect, highlighting the small Gulf state's political problems.
Race 'lends legitimacy'
On Friday, Bahrain's Crown Prince Salman bin Hamad al-Khalifa said cancelling the Grand Prix "just empowers extremists", and insisted that holding the race would "build bridges across communities".
FIA President Jean Todt said he had no regrets about the race. He said extensive investigations into the situation in Bahrain had unearthed "nothing (that) could allow us to stop the race".
"On rational facts, it was decided there was no reason to change our mind," Mr Todt said.
Shia protesters say going ahead with the race lends international legitimacy to a government that is continuing to suppress opposition with violent means.
Human rights groups and activists estimate that at least 25 people have died since the start of the latest protests, many as a result of what has been described as the excessive use of tear gas.
Stripped of citizenship?
Meanwhile, the Danish ambassador is due to visit human rights and political activist Abdul Hadi al-Khawaja, who also holds Danish citizenship, in hospital, Bahrain's interior ministry says.
He has been on hunger strike in prison for more than 70 days after he was arrested for protesting against the government. His daughter, Zeinab al-Khawaja, was also briefly detained amid protests on Saturday afternoon.
Mr al-Khawaja is now reported to be refusing water but the interior ministry says he is in "good health". His family have consistently maintained that he is in a critical condition.
The BBC's Bill Law says the visit by the Danish ambassador is fuelling suggestions that Mr al-Khawaja will be stripped of his Bahraini citizenship and sent to Denmark.
He is scheduled to appear in court on Monday to appeal against his conviction and life sentence for plotting to overthrow the government.