Turnbull's conservative voter base in the harbourside seat of Bennelong, usually a safe blue-ribbon seat, has collapsed, according to an opinion poll on Tuesday.
The Newspoll in The Australian newspaper said Turnbull's Liberal-National coalition and the opposition Labor each have a 50% chance of winning on a two-party preferred vote, with Liberal voters deserting to a newly formed conservative party.
"It is a tight race. It is very high cost. If Labor were to win in Bennelong, then (Labor leader) Bill Shorten would be very close to becoming prime minister," Turnbull told reporters in Sydney.
If Turnbull loses Bennelong, it would only take the loss of support from key independents in a vote of no confidence to see his minority government topple.
Centre-left Labor has not held power since 2013.
Turnbull has led a minority government since October after his deputy prime minister was forced to quit parliament for holding dual citizenship. Under Australia's constitution, national politicians can only have Australian citizenship.
The deputy prime minister was re-elected on December 2 after renouncing his New Zealand citizenship, but Turnbull failed to regain his one-seat majority because Bennelong's Liberal incumbent, former tennis champion John Alexander, quit parliament because he believed he might hold dual Australian-British citizenship.
Turnbull's future now rests on the voters of the affluent Bennelong electorate, where 13% of electors were born in either China or Hong Kong.
But a strain in relations between Australia and China in the past week may cost Turnbull votes.
Turnbull announced last week a ban on foreign political donations aimed at preventing external influence in domestic politics. He singled out China in announcing the ban, prompting a rebuke in China's People's Daily newspaper.
"Australia must recognise China is now leading the world. The government's attitude towards China will cost them votes, said Cao Gui Dong, a candidate for the Christian Democrat Party in Bennelong.
A loss in Bennelong would also see Turnbull's grip on the prime ministership again come under scrutiny, with one Liberal politician already calling for him to quit before Christmas.
Turnbull has fought off leadership speculation for most of 2017, amid a slump in polls as voters flock to far-right parties, but has vowed to lead his government to the next election due in 2019.
