Granollers claimed a three-set win in the decider against 2007 champion Monaco on the clay courts in Austria in 2013.
But the duo have endured disappointing seasons so far.
Argentine Monaco, once in the top 10, has slipped to 105th in the world, but enjoyed a deep run in Gstaad leading into Kitzbuhel.
Granollers of Spain has been inconsistent, mixing early exits with a fourth-round appearance at the French Open and a runner-up finish in Casablanca.
German Philipp Kohlschreiber will be the top seed at the ATP 250 event, while Italian Andreas Seppi is also competing.
Kohlschreiber was runner-up in 2012, while Seppi claimed the title two years prior.
Argentine Carlos Berlocq, Portugal's Joao Sousa, Czech Lukas Rosol, Dutchman Robin Haase and Austrian Jurgen Melzer are also among the seeds.
Haase has enjoyed the clay courts of Kitzbuhel.
He has struggled in 2014 – but was solid in Gstaad – and clinched the title in Austria in both 2011 and 2012.
The two tournament wins are the only ones of his career at ATP Tour level, while he has lost two finals since his last success.
An outing in front of his home fans will be Melzer's first since he was eliminated in the opening round at Wimbledon.
The left-hander is another player to have been disappointing this year.
The Kitzbuhel Cup shapes as an opportunity for players to turn around their seasons ahead of August's US Open.