A-Mei, who is wildly popular on the mainland, has been permanently blacklisted in China, officials said.
US soft drinks giant Coca-Cola has been forced to drop a multi-million dollar advertising campaign in China featuring A-Mei.
The petite singer, known for her giant platform shoes and high energy performances, is seen as a Chinese Mariah Carey or Madonna.
Her appeal in China had until now transcended politics and she had at times filled the role of unofficial goodwill ambassador.
Even at the height of cross-straits tensions last year, Chinese authorities allowed her to go ahead with concerts in Beijing and Shanghai.
But Beijing says A-Mei went "too far" when she sang Taiwan's national anthem at President Chen's inauguration ceremony.
China is highly suspicious of Mr Chen because of his past advocacy of independence. At his inauguration, he pledged not to declare Taiwan a separate state.
Political issue
A Chinese state television spokeswoman said: "All her songs, advertisements and programmes have been cancelled all over the country since 10 May.
"This is a political issue. She went too far on such a big occasion.
"If a singer behaves like this, how can we allow her to still appear on the mainland?"
Beijing regards the island as a renegade province and has threatened military force if it declares independence.
Ban
Brenda Lee, a Hong Kong-based spokeswoman for Coca-Cola China, which had featured A-Mei in a series of advertisements, said the company had got word of the ban on the eve of Mr Chen's inauguration.
She said Coca-Cola had been told that "TV, print and
radio advertising using A-Mei's voice had to be replaced".
Distribution of her albums in China has not yet been affected.
A-Mei, also known as Zhang Huimei, exploded on the Chinese pop scene after the 1996 December release of her debut album "Sisters".
She has since won dozens of pop music awards in Asia, released three albums and performed to sell-out crowds across the region.
In Taiwan, the Central News Agency quoted a government spokeswoman as saying she regretted the ban "very much".
A-mei, who is in Australia, could not be reached immediately for comment.