The operation, part of a five-day round-the-clock annual exercise codenamed "Han Kuang 29" (Han Glory 29), took place on the Penghu Islands in the middle of the 180-kilometre (110-mile) strait separating Taiwan from the Chinese mainland.
A cross-military-force involving the army, navy and air force were carrying out drills aimed at preparing a defence of the strategically important islands from a surprise Chinese attack.
Taiwanese officials said the operation involved a test of the Ray Ting 2000 or "Thunder 2000" multiple-launch rocket system designed to prevent the enemy from making an amphibious landing.
President Ma Ying-jeou, who initiated Taipei's much-touted detente with Beijing, said the live-fire exercise was a reminder of the lingering threat from China.
"(In) the past few years, the Chinese communists have conducted a massive arms build-up in both quality and quantity following fast economic development. In the face of the threat, we have to make some preparations if we are to sustain peace in the Taiwan Strait," Ma said.
Ma's presence overseeing the drill sparked various political interpretations, with some saying the leader -- who has come under fire in recent years for intentionally staying away from military exercises as part of his peace overture towards Beijing -- was using the exercise to help boost low approval ratings.
Others said the move was to underline a tough stance towards Beijing as a new Chinese leadership pushes for further dialogue following previous talks that led to the opening of direct flights across the strait and the signing of a comprehensive trade agreement.
China still considers Taiwan part of its territory and has vowed to take it back even if it means war, and even though the island has governed itself since their split in 1949 at the end of a civil war.
But ties have improved markedly since Ma from the Beijing-friendly Kuomintang party came to power in 2008 on a platform of beefing up trade and tourism links.
He was re-elected in January 2012 for a second and last four-year term.
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