Most information about Taiwan before the arrival of the Dutch East India Company in 1624 comes from archaeological finds throughout the island. The earliest evidence of human habitation dates back 20,000 to 30,000 years, when lower sea levels exposed the Taiwan Strait as a land bridge. Around 5,000 years ago, farmers from what is now the southeast coast of China settled on the island. These people are believed to have been speakers of Austronesian languages, which dispersed from Taiwan across the islands of the Pacific and Indian Oceans. The current Taiwanese aborigines are believed to be their descendants.

The island of Taiwan was formed approximately 4 to 5 million years ago on a complex convergent boundary between the continental Eurasian Plate and the oceanic Philippine Sea Plate. The boundary continues southwards in the Luzon Volcanic Arc, a chain of islands between Taiwan and the Philippine island of Luzon including Green Island and Orchid Island. From the northern part of the island the eastward continuation of the boundary is marked by the Ryukyu chain of volcanic islands.

The island is separated from the coast of Fujian to the west by the Taiwan Strait, which is 130 km (81 mi) wide at its narrowest point. The most significant islands in the Strait are the Penghu islands 45 km (28 mi) from the southwest coast of Taiwan and 140 km (87 mi) from the Chinese coast. Part of the continental shelf, the Strait is no more than 100 m (330 ft) deep, and has become a land bridge during glacial periods.

Taiwan is a tilted fault block, with rugged longitudinal mountain ranges making up most of the eastern two-thirds of the island. They include more than two hundred peaks with elevations of over 3,000 m (9,800 ft). The western side of the island slopes down to fertile coastal plains. The island straddles the Tropic of Cancer, and has a humid subtropical climate. The original vegetation ranged from tropical rainforest in the lowlands through temperate forests, boreal forest and alpine plants with increasing altitude.

During the Late Pleistocene glaciation, sea levels in the area were about 140 m (460 ft) lower than in the present day. As a result, the floor of the Taiwan Strait was exposed as a broad land bridge that was crossed by mainland fauna until the beginning of the Holocene 10,000 years ago. A concentration of vertebrate fossils has been found in the channel between the Penghu Islands and Taiwan, including a partial jawbone designated Penghu 1, apparently belonging to a previously unknown species of genus Homo. These fossils are likely to date from one of the two most recent periods when the Strait was exposed, 10–70 kya and 130–190 kya.

The Ryukyu Islands to the northeast of Taiwan were settled during marine isotope stage (MIS) 3, which ended around 30,000 years ago. It is likely that the southern (and possibly central) Ryukyus were settled via voyages from Taiwan.

In 1972, fragmentary fossils of anatomically modern humans were found at Chouqu and Gangzilin, in Zuojhen District, Tainan, in fossil beds exposed by erosion of the Cailiao River. Though some of the fragments are believed to be more recent, three cranial fragments and a molar tooth have been dated as between 20,000 and 30,000 years old. The find has been dubbed "Zuozhen Man". No associated artifacts have been found at the site.

The oldest known artifacts are chipped-pebble tools of the Changbin culture (長濱文化), found at cave sites on the southeast coast of the island. The sites are dated 15,000 to 5,000 years ago, and similar to contemporary sites in Fujian. The primary site of Baxiandong (八仙洞), in Changbin, Taitung was first excavated in 1968. The same culture has been found at sites at Eluanbi on the southern tip of Taiwan, persisting until 5,000 years ago. The earliest layers feature large stone tools, and suggest a hunting and gathering lifestyle. Later layers have small stone tools of quartz, as well as tools made from bone, horn and shell, and suggest a shift to intensive fishing and shellfish collection.