There is evidence of inhabitation dating back roughly 20,000 years, possibly by now-extinct Negritos (see Pygmy). The origins of Taiwan's Austronesian aborigines, who may have arrived c.8,000 years ago, are a matter of debate. Some believe that these early inhabitants migrated from the Malay Archipelago, while others assert that they came from what is now SE China. The earliest Chinese settlements on Taiwan began in the 7th cent., chiefly from the mainland provinces of Fujian and Guangdong. The island was reached in 1590 by the Portuguese, who named it Formosa [=beautiful]. In 1624 the Dutch founded forts in the south at present Tainan, while the Spanish established bases in the north. The Dutch, however, succeeded in expelling the Spaniards in 1641 and assumed control of the entire island. They in turn were forced to abandon Taiwan in 1662, when Koxinga, a general of the Ming dynasty of China who had to flee from the Manchus, seized the island and established an independent kingdom. However, the island fell to the Manchus in 1683. Chinese immigration increased, and the aboriginal population was gradually pushed into the interior.

Japan, attracted by the island's strategic and economic importance, acquired Taiwan by the Treaty of Shimonoseki (1895) after the First Sino-Japanese War. Japan exploited the island for the benefit of the Japanese home economy and tried to establish Japanese as the language of the island. The island was scarcely used, however, for Japanese colonization. Under Japan, Taiwan's economy was modernized and industrialized, railroads were built, and the large cities expanded. During World War II, Taiwan was heavily bombed by U.S. planes. In accordance with the Cairo declaration of 1943 and the Potsdam Conference of 1945, Taiwan was returned to China as a province after the war.

In 1949, as the Chinese Communists gained complete control of the mainland, the Nationalist government of Chiang Kai-shek and the remnants of his army took refuge on the island. The Chinese Communists planned an invasion of Taiwan in 1950, but it was thwarted when President Truman ordered the U.S. 7th Fleet to patrol Taiwan Strait. Japan renounced all claims to Taiwan and the Pescadores in the peace treaty of 1951, but Taiwan's territorial status remained a major issue among the great powers. In 1953, President Eisenhower announced the lifting of the blockade of Taiwan by the U.S. navy. In 1955, following repeated attacks by the People's Republic of China against the Nationalist-held islands of Quemoy and Matsu, the United States entered into a mutual security treaty with the Nationalists in which the U.S. promised to defend Taiwan from outside attack.

In 1958 there was continuous, intensive shelling of Quemoy and Matsu, and an invasion was again threatened. China reiterated its demands to the island, but the United States reasserted its determination to defend Taiwan, although it stressed that there was no commitment to help the Nationalist government return to the mainland. By the spring of 1959 bombardment of the islands had diminished, but no agreement had been reached. At that time, the Nationalist army was trained and equipped by the United States and there was also a sizable navy and modern air force. In support of Chiang's repeated declaration to free China from the Communists, Taiwan long served as a base for espionage and guerrilla forays into the Chinese mainland and for reconnaissance flights over China.

Internally, the Nationalist government implemented land reforms, which improved the lot of the peasants by allowing tenants to purchase their own land; much of it was bought by the government from big landlords and sold to tenant farmers under lenient terms. With U.S. economic aid, Taiwan enjoyed spectacular economic growth after 1950. The aid program was so successful that it became superfluous and was terminated after 1965. Chiang Kai-shek, elected to his fifth six-year term as president in 1972, was criticized for dictatorial methods. Between a native Taiwanese movement for independence and the continuing threat from China, the position of the Nationalist government was far from secure in the 1960s and 70s. Chiang died in 1975 and was replaced as president in 1978 by his son, Chiang Ching-kuo.

China's seat in the United Nations was taken away from the Republic of China and given to the People's Republic in 1971. Taiwan's international position continued to weaken in the early 1970s as the United States sought to improve relations with the People's Republic of China and as more large countries, such as Canada and Japan, moved to recognize the mainland government. The United States established formal diplomatic relations with the People's Republic of China on Jan. 1, 1979, which necessitated the cutting of its defense ties with Taiwan. To compensate, the United States passed (1979) the Taiwan Relations Act, which allows for the sale of defensive arms to Taiwan. Taiwan was also expelled (1980) from the International Monetary Fund and the World Bank in favor of the People's Republic of China. (the country does, however, belong to the World Trade Organization and the Asia-Pacific Economic Cooperation). Official social and economic contact is maintained with the United States through the American Institute on Taiwan and the Coordination Council for North American Affairs.

The process of liberalization and democratization increased in Taiwan throughout the 1980s. The government's new openness included the recognition of some of its past actions, such as the Nationalist government's massacre of thousands of native Taiwanese in 1947. Although friction has lessened between the island Chinese, who make up about 85% of the population, and those who came from the mainland, it has remained a problem. Martial law, in effect since 1949, was lifted in 1987 and many jailed political dissidents were released. Opposition parties were legalized in Jan., 1989. Relations with mainland China were eased somewhat during the 1980s so that Taiwanese were allowed to visit after 1987, but the crackdown at Tiananmen Square in 1989 fanned Taiwanese mistrust of the mainland.

Chiang Ching-kuo died in 1988 and was replaced by Lee Teng-hui, a Taiwan native, who was reelected by the national assembly in 1990. In 1991, Lee ended emergency rule, and all the members of the national assembly, many of whom were mainland delegates originally elected in 1947, stepped down. In elections for a new national assembly, the ruling Kuomintang (KMT), which continued to promise unification with the mainland, held on to a majority, but the Democratic Progressive party, strongly advocating an independent "Republic of Taiwan," won nearly a third of the seats; the KMT retained its hold on the legislature throughout the 1990s.

In 1995 and 1996, Beijing conducted missile tests and ultimately military exercises near Taiwan in an effort to inhibit Taiwanese moves toward democracy and independence. In 1996, President Lee, who was opposed by the Beijing government, won a landslide victory in Taiwan's first-ever direct elections for president. A major earthquake hit central Taiwan in Sept., 1999, killing more than 2,000 people and causing massive infrastructure damage.

In the 2000 Taiwanese presidential election, a KMT split resulted in the election of the opposition candidate, Chen Shui-bian of the Democratic Progressive party (DPP); the KMT retained control of the legislature. Chen did not move officially to alter Taiwan's status. In Oct., 2000, Chen cancelled a half-built nuclear power plant, creating a political crisis with the KMT-dominated legislature, which accused him of exceeding his powers; the crisis ended when Chen reversed himself in Feb., 2001. Limited direct travel and trade with China was permitted by Taiwan from Matsu and Quemoy beginning in Jan., 2001, and in November restrictions on Taiwanese investment in China were lifted. In the December legislative elections the DPP won the largest bloc of seats for the first time, but a bare majority of the seats were won by KMT and its offshoot, the People First party.

In late 2003 Taiwan passed a law permitting the holding of referendums; the move was stridently criticized by China, which believed the law would be used to obtain a vote for independence, and also criticized by the United States, which regarded such a vote as unnecessarily provocative. Chen won reelection in Mar., 2004, narrowly defeating KMT candidate Lien Chan in a two-person race. In the last days of the campaign Chen was wounded in an apparent assassination attempt; the opposition accused him of staging the shooting in an effort to win votes. The narrow victory also led to opposition calls for a recount, but the election was ultimately upheld after challenges in the courts.

Chen's victory led to DPP hopes for gains in the legislative elections in Dec., 2004, but the party failed to win a majority. The vote was seen as a defeat for Chen, who resigned as DPP chairman. China's adoption (Mar., 2005) of an antisecession law, which called for the use of force if peaceful means failed to achieve reunification with Taiwan, sparked protests in Taiwan.

In April and May China hosted Taiwanese opposition leaders in an attempt to undermine President Chen, but elections for a constitutional assembly in mid-May resulted in a plurality for the DPP. In Dec., 2005, however, the DPP did poorly in local elections. Chen's announcement in Feb., 2006, that the National Unification Council, a largely symbolic body on unification with the mainland, would cease to function brought a sharp response from China, which regarded the action as a possible move toward independence.

Revelations in May that the president's son-in-law was under investigation for insider trading—he was indicted for insider trading in July and convicted in December—led Chen to cede control of the cabinet to the prime minister. It also resulted in a recall move (June) against the president in the legislature, but the opposition measure failed to win the required two-thirds majority. In September there were a series of demonstrations against the president and in support of a second recall move; the move failed in October. In Nov., 2006, prosecutors charged Chen's wife with corruption over the handling of secret state funds and said that Chen himself would have been indicted but was protected by his presidential immunity. Chen denied the charges, but it led the opposition to mount a third recall move in the legislature, which also failed (Nov., 2006).

In the local elections in Dec., 2006, the DPP did better than expected, as its supporters did not abandon the party despite the scandals involving Chen. A major undersea earthquake S of Taiwan during the same month damaged a number of telecommunications cables and disrupted international communications among a number of E and SE Asian nations. The Jan., 2008, legislative elections resulted in a landslide victory for the KMT, which won more than two thirds of the seats, and the KMT candidate for president, Ma Ying-jeou, subsequently (March) easily defeated the DPP candidate.

The vice president-elect met in April with China's president; the highest level official contact between Taiwan and China since 1949, it was seen as sign of better relations between the two. In Nov., 2008, Taiwan and China signed agreements that led to improved trade and transportation between them; additional accords have since been agreed, with a landmark bilateral trade pact that removed tariffs on many products signed in June, 2010. Former President Chen and his wife, among others, were indicted on corruption charges in Dec., 2008; they were convicted in 2009 and on other charges in 2010 and 2011. In Aug., 2009, a typhoon caused significant destruction in S Taiwan and killed more than 600 persons; the government's poor handling of the disaster led to the resignation of the prime minister. Ma was reelected in Jan., 2012; in the legislative elections, the KMT retained a sizably reduced majority of the seats.