British bookmaker William Hill listed Tokyo as the 4-6 favorite, with Istanbul at 5-2 and Madrid at 3-1.
While Tokyo is seen as a safe choice, Istanbul holds the emotional pull of representing a new destination for the Olympics, a key factor in recent host city votes.
The IOC is taking the 2014 Winter Games to the Russian city of Sochi, the 2016 Olympics to Rio de Janeiro and the 2018 Winter Games to Pyeongchang, South Korea. Istanbul, which straddles both Europe and Asia, would take the games to a predominantly Muslim country for the first time.
"This is a new bid for a new Turkey," Istanbul bid leader Hasan Arat told The Associated Press in a telephone interview from Lausanne. "This time we are not in the same position as our four previous bids. This is the latest step in a journey that is taking five bids and nearly two decades. We experienced, we listened and we learned."
All three bids face geopolitical and economic challenges.
Spain is in the throes of its second recession in just over three years, with its economy battered by a collapse in the real estate sector and unemployment as high as 25 percent. Madrid bid leaders say most of their venues are already built and the Olympics could serve as a catalyst for economic recovery.
Japanese leaders have said hosting the Olympics in Tokyo would serve a symbol of recovery from the disastrous earthquake and tsunami in 2011. Japan has also been in a nasty dispute with China over a cluster of islands in the East China Sea and has just undergone a change in government that brought Shinzo Abe to power as prime minister.
Istanbul's Olympic bid had previously been compromised by Turkey's desire to host the European soccer championship in 2020. That became moot when UEFA decided to spread the tournament across the continent.