The former Blur frontman's debut solo project, Everybody Robots, and Royal Blood's self-titled release are the joint favourites to land the best British and Irish album of the year title, according to official bookmakers at William Hill.
However, rival firm Ladbrokes have given FKA Twigs' Lp1 and poet Kate Tempest's Everybody Down the edge on its odds list.
The newly-announced shortlist also features Bombay Bicycle Club (So Long, See You Tomorrow), Anna Calvi (One Breath), GoGo Penguin (v2.0), East India Youth (Total Strife Forever), Jungle (Jungle), Polar Bear (In Each and Every One), Young Fathers (Dead) and Nick Mulvey (First Mind).
The 12 acts will compete for a $34,000 (£20,000) prize, which will be announced in London on 29 October (14).
Albarn's nomination is his first since he withdrew his band Gorillaz's self-titled debut from contention in 2001, when he compared the honour to "carrying an albatross around your neck for all eternity".
Singer/songwriter James Blake took home the 2013 Mercury Prize for his album Overgrown.