The boisterous democracy is likely to push back against Beijing by bringing scholar-turned-politician Tsai Ing-wen to power, unseating the China-friendly ruling party.
Voters are uneasy about warming relations with Beijing and, as the economy stagnates, many are frustrated that trade pacts signed with China have failed to benefit ordinary Taiwanese.
Tsai is the leader of the Democratic Progressive Party (DPP) which has a much warier approach to China than the unpopular ruling Kuomintang (KMT). Tsai is well ahead of KMT candidate Eric Chu in the polls.
“I feel very proud to have this right to participate in decision-making on our future,” said finance worker Sean Chen, 31, voting in Taipei.
“It’s a chance to tell the world what we really think.”
Many criticised the KMT for failing to deliver on the economy and moving too close to China.
“Taiwan needs change, economically and politically,” said one 65-year-old voter in Taipei who gave his name as Lee.
“The government leaned too easily on China — it’s harmful for our democracy.”
In the KMT stronghold of New Taipei City, however, some voters were subdued.
“I’m afraid Tsai Ing-wen is likely to get elected. You know her position on cross-strait ties — if she cannot properly handle the issues and tensions escalate, no-one will benefit,” said shop owner Yang Chin-chun, 78.
Others there said it was time for change.
“(The) economy is my major concern. (Current president) Ma Ying-jeou has let us down,” said department store worker Chien Ya-wen, 37.
– Beijing warnings –
Tsai has walked a careful path on her China strategy, saying she wants to maintain the “status quo” with Beijing.
But the DPP is traditionally a pro-independence party and opponents say Tsai will destabilise relations.
After decades of enmity, current KMT president Ma Ying-jeou has overseen a dramatic rapprochement with China since coming to power in 2008.
Although Taiwan is self-ruling after it split with China following a civil war in 1949, it has never formally declared independence and Beijing still sees it as part of its territory awaiting reunification, by force if necessary.
The thaw culminated in a summit between Ma and Chinese President Xi Jinping in November.
Yet despite more than 20 deals and a tourist boom, closer ties have exacerbated fears that China is eroding Taiwan’s sovereignty by making it economically dependent.
In 2014, the government was forced to shelve a trade pact after student-led protesters occupied parliament.
Low salaries and high housing prices are also riling voters.
Beijing has warned it will not deal with any leader who does not recognise the “one China” principle, part of a tacit agreement between Beijing and the KMT known as the “1992 consensus”.
The DPP has never recognised the consensus.
Observers say it is unlikely Tsai will do anything to provoke Beijing if she wins — the majority of voters want peace with China.
Analysts also agree there will not be any immediate backlash from China, as alienating Taiwan would play against Beijing’s ultimate aim of reunification.
However some say it may employ tougher tactics if it feels there is no progress in dialogue.
Polls close at 4:00 pm (0800 GMT), with results announced Saturday night.
Voter turnout has been over 70 percent since democratic elections began in 1996, and 18.78 million are eligible to vote.
There are also parliamentary elections Saturday, with the KMT risking losing its majority in the legislature.