Taiwan’s democratization is fundamentally election-driven. This article analyzes how Taiwan’s electoral competition has brought about dramatic changes in party system at the elite and mass levels. On the one hand, electoral opening provides political elite an institutional channel to organize and mobilize the people. On the other hand, the people’s sociopolitical attributes also mold the elite’s perception, calculations and interactions through the electoral process. The first part of the paper introduces the configuration of Taiwan’s new party system and points out that electoral competition has given rise to a moderate multiparty system, with supporters of major parties exhibiting distinct sociopolitical characteristics. Part two explores factors that have shaped Taiwan’s party system, including preexisting social cleavages, electoral rules, and political elite’s mobilization strategy. Part three examines the functioning of the new party system, especially how party coalitions and counter-coalitions are formed during legislative processes and how the general public perceives the differences of the major parties. The conclusion discusses the implication of this new party system for Taiwan’s democratic future.