By Caroline Gluck
BBC News, Taipei
Frank Hsieh, the presidential nominee for Taiwan's governing Democratic Progressive Party (DPP), has agreed to take over as its acting chairman.
Mr Hsieh said he did not want DPP voters to lose hope
The announcement follows President Chen Shui-bian's decision to step down from the post at the weekend.
Mr Chen resigned to take responsibility for the party's crushing defeat in the country's legislative elections.
The opposition Kuomintang (KMT), which wants closer ties with China, took 81 seats out of the 113-seat legislature.
While the KMT is still savouring its landslide election win, the governing DPP is facing some difficult decisions.
Party morale is extremely low and it knows it needs to reorganise and overhaul its campaign strategy to win back the support of voters.
Polls show Ma Jing-jeou's party leading by a large margin
Following an extraordinary meeting of the party's executive committee, presidential nominee Frank Hsieh agreed to take over as the party's acting chairman.
He said he did not want millions of people who had voted for the party to lose hope.
The change could mark the start of a shift by his party towards the middle ground.
President Chen, who dominated the party's campaign for the legislative elections, had pushed ideological issues, stressing the need for the island to strengthen its separate identity from China.
But Frank Hsieh, who is regarded as more moderate and pragmatic, has long argued that the party needs to address economic and social issues if it is to broaden its appeal to voters.
On Sunday, at a rally to try to boost the morale of his supporters, he urged the public to give him and his party another chance, saying it would be important to have checks and balances of power.
He warned that one-party control of the parliament and presidency would mean a setback for Taiwan's democracy.
Even so, it will be a struggle for him and his party to make up lost ground.
Opinion polls show the KMT's presidential candidate, Ma Ying-jeou, leading by a wide margin.