Open exclusively to musicians from Renfrewshire, where the star grew up, the Gerry Rafferty Songwriting Prize aims to uncover fresh talent .
The prize includes a performance slot at a major songwriting festival.
Rafferty, who died last year, was born in Paisley and raised on a diet of Irish and Scottish folk songs.
He was later influenced by songwriters such as John Lennon and Paul McCartney, Bob Dylan and Paul Simon.
Rafferty went on to achieve international success with solo hits Baker Street and Right Down The Line and with the band Stealer's Wheel and its hit song Stuck In The Middle With You.
Rafferty's legacy spans several decades and his daughter Martha, who will be one of the judges, is delighted the competition will add to that history.
She said: "I am delighted that the legacy my father created can go on to inspire and enable another songwriter to be given a platform for their voice to be heard.
"Opportunities to break through are few and far between. I will be listening for conviction, heart and originality."
The competition is being organised in association with the music charity Burnsong, the UK Songwriting Festival, Renfrewshire Council and The Year Of Creative Scotland.
It is open to people who live in Renfrewshire and to submissions from all genres of music.
The prize includes a place at the UK Songwriting Festival, which will be in Scotland for the first time in August.
The winner will also receive mentoring from the tutors of Bath Spa University's songwriting masters degree and Iain Archer, the Ivor Novello-nominated collaborator with pop group Snow Patrol.
Jim Gellatly, new music mogul, DJ and also a judge for the competition, said: "It is an honour to be asked to judge such a prestigious competition, especially in the name of a legendary figure like Gerry.
"I'm looking forward to hearing the submissions, which I am sure will prove that we continue to punch above our weight as a nation when it comes to the creative arts."
Renfrewshire Council Provost Anne Hall added: "Renfrewshire has a proud musical heritage and Gerry was very much a part of that tradition.
"His work and career showed that talent from Renfrewshire could be recognised the world over.
"It is a fitting tribute to him that the arts of songwriting and performance, to which he brought such a unique perspective, will be showcased in this competition.
"It will give another Renfrewshire native a chance to follow his path."
To enter, songwriters must submit up to two original songs by July 6.
For more information, including detailed entry rules, see: www.facebook.com/ GerryRaffertyPrize/info