The BBC's Jill McGivering: "Elections are being hailed as a political landmark"

According to preliminary results, the nationalist KMT party strengthened its majority in the national parliament - with its share of seats rising to 55% from 52%.

Analysts had thought the KMT could lose its paper-thin majority in the legislature.

The party also regained the strategically-important post of mayor of Taipei after four years of opposition control.

KMT candidate Ma Ying-jeou told crowds of cheering supporters: "It's not my personal victory, but a victory for all of Taipei's citizens."

President Lee Teng-hui getting into the campaign spirit

Turnout was high among the island's nearly 15 million eligible voters. Officials estimated 80% had cast ballots in Taipei.

China has been watching the poll closely. Taiwan's main opposition Democratic Progressive Party (DPP) backs formal independence from the mainland, while the KMT supports eventual unification.

Mr Ma is a former justice minister, and one of the KMT's most popular politicians. By winning the Taipei mayor race, he may have damaged the chances that the incumbent, Chen Shui-bian, will stand for president in 2000.

'Setback for democratic movement'

Mr Chen conceded defeat, calling on supporters to "respect this decision".

"Democracy is about people making a decision, whether in choosing a mayor or deciding the country's future," he said.

The chairman of the DPP, Lin Yih-hsiung, said the result was a setback for the democratic movement.

"We will learn from this and make a new start," he said.