Welsh's The Blade Artist, featuring the return of Trainspotting character Begbie, has been shortlisted for the Fiction Book of the Year award.
He is up against Kelman's latest novel Dirt Road, as well as the Man Booker Prize-nominated His Bloody Project by Graeme Macrae Burnet.
The winner will be announced in Edinburgh on 24 November.
Also shortlisted are The Sunlight Pilgrims by Granta's best young British novelist Jenni Fagan, Kevin MacNeil's The Brilliant & Forever, and This Must Be The Place from best-selling author Maggie O'Farrell.
The Saltire Society organises the awards, which cover poetry, research, non-fiction, history and first-time writers. Winners are given Â£2,000.
Kathleen Jamie and Don Paterson are among those shortlisted for the Poetry Book of the Year award, while Orkney author Amy Liptrot's The Outrun and John Kay's Other People's Money are two of the candidates for the non-fiction award.
Those in line for the First Book of the Year award include Scottish lawyer Isabel Buchanan for her biographical account of working on death-row cases in Pakistan, aged 23.
The winning book from each category will go on to compete for the Saltire Scottish Book of the Year award and a Â£6,000 prize, which last year went to Michel Faber for his novel The Book of Strange New Things.
Jim Tough, Saltire Society executive director, said: "Spanning academia, poetry, biography and prose, the sheer scale and variety of writing talent to be seen in the shortlists is remarkable.
"As always, excellence is evident across all awards and I know the judges will have their work cut out to decide upon winners."

Dufner shot a second successive seven-under-par round of 65 for a tournament record 36-hole total of 14 under par.
Rickie Fowler shot six under for the day to move third and within one stroke of fellow American Daniel Summerhays, with Jordan Spieth still on six under.
Scotland's Martin Laird is a stroke further back at five under par.
Dufner, who began his second round on the 10th, holed from 176 yards at 18 as his approach to the back of the green rolled down the slope and into the cup for an eagle.
"We got two more rounds to go. We'll see how the course changes, if the wind picks up, gets running fast, it plays different. We'll just see," said the 40-year-old.
World number six Spieth was one shot off the lead after an opening round of 66, but three bogeys on the front nine saw him drop to tied fourth.
Meanwhile, world number one Dustin Johnson missed the cut at eight over par.

John Lamont quit the Ettrick, Roxburgh and Berwickshire constituency seat to fight for a place at Westminster, hoping to unseat the SNP's Calum Kerr.
The Conservative MSP formally resigned from the seat as of 13:00 on Thursday.
The by-election means residents in the area will vote on their local council, their Holyrood representative and their MP all inside five weeks.
Selection procedures for the Holyrood by-election have yet to get under way.
Presiding Officer Ken Macintosh has written to Tracey Logan, chief executive of Scottish Borders Council and returning officer for the elections, to confirm his choice of date and to ask for arrangements for the by-election to be put in place.
Mr Lamont is seeking to unseat the SNP's Calum Kerr in Berwickshire, Roxburgh and Selkirk, Scotland's most marginal Westminster constituency. Mr Kerr gained the seat from Lib Dem former Scottish Secretary Michael Moore in 2015 by a margin of 328 votes.
The Lib Dems have put forward Catriona Bhatia, currently deputy leader of the council, as their candidate for the Westminster poll.
Irvine Welsh and James Kelman are among the famous names in the running for this year's Saltire Literary Awards.
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American Jason Dufner will take a five-shot lead into the third round of the Memorial Tournament after carding an eagle on the 18th hole on Friday.
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A Holyrood by-election is to be held on the same day as the UK's snap general election on 8 June.