The country's Parliament was dissolved in November by President Baldwin Lonsdale after 14 MPs, including a former prime minister, were jailed for bribery.
The political breakdown in Port Vila followed a period of instability with four changes of prime ministers in the past four years.
A total of 264 candidates are vying for 52 seats, with foreign election observers remaining in Vanuatu until Monday.
Hubert Ingraham is the former prime minister of the Bahamas and the chairman of the Commonwealth Observer Group.
He said Friday's election "went fairly well" in the country of more than 80 remote islands.
"It ran smoothly, yes. My team is out," he told The World.
"We will consider all of the factors that we observed and make some determinations.
"I interacted with some of the Australian delegations today also. I think that the extent to which there were evident shortcomings in the process would be reflected in final reports we make."
Electoral irregularities reported ahead of vote
The vote went ahead on Friday despite criticism that the electoral roll was not up to date.
Electoral Commission chairman John Killion Taleo said there was not enough time to add people who reached the voting age of 18 since last July to the roll.
I expect that the turnout today would be reflective of Vanuatu people wanting to have a change.
Hubert Ingraham, chairman of the Commonwealth Observer Group
Priscilla Meto, the president of Vanuatu Youth Against Corruption, claimed about 3,000 eligible names were missing from the roll.
There was also a problem with removing the names of people who had died, as some of the impoverished nation's outer islands do not maintain official records of residents who passed away.
Mr Ingraham said there was a broad agreement amongst political leaders in Vanuatu that "changes must take place" to improve the country's electoral process.
He added, however, that he did not think the electoral irregularities particularly benefitted one side or the other.
"I think that all sides know there are more people on the register than the population would say are qualified to be there. That has to change," he said.
"But in relation to the register itself, its inaccuracy does not appear to be the result of fraudulent activity.
"It is the result of keeping pace with the movement of those not qualified to be there or those who are deceased."
On October 21, Vanuatu's Deputy Prime Minister Moana Carcasses was sentenced to four years in jail for bribery and corruption, joining 13 other MPs — or half of the country's government — in being sentenced to three or more years in jail.
As one of two former prime ministers jailed in the scandal, Mr Carcasses was found to have made cash payments amounting to 35 million vatu ($452,000) to his fellow parliamentarians last year while in opposition.
"It is wonderful that a small country like Vanuatu is able to prosecute persons such as the former MPs and for them to be convicted and imprisoned," Mr Ingraham said.
"It gives the population a level of confidence that the rule of law is prevalent and that no one is above the law.
"I expect that the turnout today would be reflective of Vanuatu people wanting to have a change."
Vanuatu, which gained independence in 1980 and has an estimated population today of more than 270,000, is still recovering from a deadly category-five storm last March that destroyed homes and crops and contaminated water supplies.