The main opposition party in Taiwan has dropped its objection to any referendum on independence, in a move that is certain to alarm China.
The KMT still wants reunification with China
The Kuomintang (KMT) party said it was the Taiwanese population's "democratic" right to hold a referendum.
But it still wants the island to reunify with China and will not support independence in any referendum.
China has threatened to invade if Taiwan declared independence, and has warned Taiwan not to hold a referendum.
Taiwan's President, Chen Shui-bian, has suggested the idea of a referendum on a number of occasions in order to resolve the island's uncertain status, and
later this week Taiwan's parliament is due to discuss whether to introduce a law to allow a referendum to be held.
On Wednesday, Zhang Mingqing, spokesman for China's Taiwan Affairs Office, again repeated Beijing's opposition to any separatist moves in Taiwan.
"If Chen Shui-bian continues to take the road to independence, it will inevitably harm the interests of Taiwan's people and bring disaster," he said.
The KMT's announcement represents a major shift in policy for the party, also known as the Nationalists, which along with Beijing believes Taiwan is part of China.
Alex Tsai, a spokesman for the KMT, told BBC News Online: "We are a party which follows democratic principles so there is no reason to stop this legislation."
President Chen suggested the idea of a referendum
The KMT has also reversed its objection to a debate on the island's official name - it is currently called the Republic of China - and its flag.
But the KMT's move is seen by some as a political ploy ahead of presidential elections in Taiwan next year - which are expected to be close - rather than a fundamental change of heart.
Mr Tsai admitted the forthcoming election had led to the change in policy.
"The opposition accuse us of following the Chinese communist's will, but we are not going to fall into that kind of trap," he said.
Although Taiwan functions as an independent country, it is officially recognised by only a handful of mostly small and politically insignificant countries.
Most countries support China's claim that Taiwan, headed by President Chen Shui-bian, is part of the mainland.
The two sides of the Taiwan Strait have been divided since 1949 when the KMT, headed by Chiang Kai-shek, lost a civil war in China and fled to Taiwan.