The hearing comes 18 months after Tsvangirai first filed a petition against the election, claiming Mugabe violated electoral laws and used dirty tactics to win himself a fifth term in office.
The start of the long-awaited petition attracted a large audience that crammed into a courtroom in the Harare High Court.
As Tsvangirai, his wife and other senior officials from his Movement for Democratic Change (MDC) looked on, South African lawyer Jeremy Guantlett told Justice Ben Hlatshwayo that the disputed poll was conducted in an environment that was "blatantly unconstitutional".
Guantlett argued that the Electoral Supervisory Commission (ESC), whose members are appointed by Mugabe, had scuttled chances of a free and fair election.
He told the court: "The fairness and genuineness of the elections were stifled at birth by that extraordinary sight of the incumbent ... being set up as a main rule-maker in an election in which he was one of the two main actors".
Tsvangirai, who has posed the greatest challenge ever to Mugabe's 23-year grip on power, wants a rerun of the March 2002 poll, which was largely condemned by Western observer groups, as well as one from the Commonwealth.
They said that the poll had been fundamentally flawed and marred by violence and vote-rigging.
However other African observer groups, including one from neighbouring South Africa, a key ally of Zimbabwe, declared that the election had been free and fair.
Mugabe was declared the winner of the election with 56,2% of the votes, against 41,9% for his fiery opponent.
Tsvangirai's lawyers also intend to argue that Mugabe tightened electoral laws to disqualify large numbers of voters ahead of the poll.
These included thousands of white voters - perceived to be opposition supporters - and millions of black Zimbabwean voters working abroad.
An estimated three million Zimbabweans who have escaped economic problems at home now live in South Africa, while tens of thousands more have gone to Botswana, Mozambique and Britain.
Tsvangirai mounted his challenge last year, just as crisis talks between his party and Mugabe's Zimbabwe African National Union - Patriotic Front (Zanu-PF) were starting.
The move prompted the ruling party to pull out of the talks, which had been brokered by South Africa and Nigeria and aimed at resolving the problems created by the disputed elections.
Efforts have been made to get the two parties to resume dialogue, but Mugabe says he will not talk to his MDC opponent unless Tsvangirai accepts him as the legitimate head of state.
Zimbabwe has been polarised between Tsvangirai's supporters and those of Mugabe since the MDC stormed onto the political stage in 2000, winning nearly half of the contested seats in legislative elections.
This is the second high-profile court case Tsvangirai has been involved in this year.
The former trade unionist is still on trial for allegedly plotting to assassinate Mugabe ahead of the March 2002 election.
He denies the charges, which carry the death penalty on conviction. – Sapa-AFP.
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