Taiwan has re-established formal diplomatic ties with the Caribbean island of St Lucia - taking the number of its diplomatic allies to 25.
St Lucia and Taiwan have re-established ties after 10 years
Taiwan's foreign minister signed the agreement with his St Lucian counterpart on a visit to the island.
The decision is almost certain to prompt China to sever its ties with St Lucia, correspondents say.
Beijing regards Taiwan as part of its territory, and requires its diplomatic allies not to recognise the island.
Both Taiwan and China have battled for years for diplomatic partners, accusing each other of using "dollar diplomacy" to win over allies.
In recent years, China has been gaining the upper hand as its status and economic position around the world have grown, the BBC's Caroline Gluck in Taipei says.
Tuesday's agreement re-establishes ties that were cut by St Lucia a decade ago under a previous administration.
Taiwan's diplomatic victory was announced back home via a live satellite link from St Lucia, our correspondent reports.
"After four-and-a-half months of hard work, we accomplished the mission to restore diplomatic ties with St Lucia," Foreign Minister James Huang told a Taipei press conference via telephone.
He said Taiwan would offer St Lucia help on a range of projects, from agriculture, education and business to medical assistance.
He also said he hoped the deal would not result in China cutting its ties with St Lucia.
"We hope for a win-win situation for all and we do not mean to engage in zero-sum games with China," he said.
But the signs from Beijing were not encouraging.
"The resumption of diplomatic relations between St Lucia and Taiwan is a flagrant violation of the declaration on the establishment of diplomatic relations between China and St Lucia," foreign ministry spokesman Liu Jianchao said.
He urged St Lucia to rethink the decision or "be responsible for the consequences incurred".