Both men came out in determined mood as the debate kicked off, with Hollande accusing Sarkozy of dividing the French and vowing that if he wins on Sunday he would be a "president who brings people together".
"I will be a president of justice because we are going through a difficult crisis, a serious crisis that hits the most humble among us, so I want justice to be at the heart of the republic," Hollande said.
Sarkozy said voters were facing a "historic choice" and: "France cannot make a mistake – we are not in a crisis, we are in many crises."
Polls show Hollande, 57, is the favourite to win in Sunday's run-off vote after he came out ahead of Sarkozy in an April 22 first round that left eight
other candidates behind.
The debate turned quickly to the economy, with tensions rising as the two candidates sought to speak over each other.
"Our unemployment has risen, our competitiveness has worsened and Germany is doing better than we are," Hollande said, slamming Sarkozy's economic record.
"Why is Germany doing better than us? Because Germany has done the opposite of the policies you are proposing to the French people," Sarkozy hit back.
"With you it's very simple. Nothing is ever your fault. Whatever happens you're happy." Hollande said, as the debate became heated and Sarkozy accused Hollande repeatedly of "lying" and "slander".
Sarkozy is struggling to overcome the lowest popularity ratings of any sitting French president and is the first-ever incumbent to have lost in the first round.
The French left has not won a presidential election in a quarter of a century, but fears over low economic growth, rising joblessness and European Union-imposed austerity have given the Socialists a boost.
Many voters also disapprove of Sarkozy's flashy style during his five-year term and have welcomed the Hollande's vows to be a "normal president".
Sarkozy has derided Hollande's traditional tax-and-spend programme as potentially catastrophic for the economy, warning that a Socialist win would cause panic on the financial markets and spark economic chaos.
The latest poll by IFOP released Wednesday showed Hollande ahead with 54 percent of votes to 46 percent for Sarkozy.
In the days since the first round Sarkozy, also 57, has sought to woo the nearly 18 percent of voters who backed Marine Le Pen of the anti-immigrant National Front -- a record result for the far right.
Sarkozy has vowed to "defend the French way of life", drastically reduce immigration and secure France's borders, but Le Pen dashed his hopes of an endorsement on Tuesday saying she would cast a blank ballot on Sunday.
Wednesday's IFOP poll showed 43 percent of Le Pen's first-round backers planned to vote for Sarkozy but that 39 percent were undecided.
The debate came after Sarkozy staged a huge election rally on Tuesday to rival France's traditional May Day show of force by the left, with organisers claiming about 200,000 rallied at the Trocadero in Paris's posh 16th district.
Sarkozy, generally seen as a more aggressive debater than Hollande, had urged his opponent to hold three debates before the second round, but the Socialist said the traditional one would be enough.
The debate, broadcast live by several channels, was meticulously prepared, with the smallest of details worked out in advance.
The two candidates faced each other in chairs across a table, exactly 2.5 metres (8.2 feet) apart, separated by two moderators, with clocks ticking away their speaking time.
Both men wore simple dark suits and dark ties. The temperature in the room was set at 19 degrees Celsius (66.2 degrees Fahrenheit), with each of the debaters even given personal air conditioners.