The military sent reconnaissance aircraft to observe simulated incoming ships, and tanks fired rounds as the "enemy" landed at the eastern port of Hualien.
Attack helicopters fired flares and F-16 fighter jets launched simulated assaults, backing up the ground battle against the "enemy" troops -- who wore red helmets to differentiate themselves.
The ministry did not specify that the annual drill simulated an invasion by China but said it was intended to "show determination to safeguard peace in the Taiwan Strait and national security".
The Taiwan Strait separates the island from China.
Tsai last month warned against what she called Beijing's "military expansion" -- the increase in Chinese air and naval drills around the island since she came to power in May 2016.
There is also a dispute about new flight routes by Chinese airlines in the strait.
Beijing sees self-ruled Taiwan as part of its territory awaiting reunification, by force if necessary.
Cross-strait relations have turned frosty since the inauguration of Tsai, who refuses to acknowledge self-ruling, democratic Taiwan is part of "one China".
The drill on Tuesday takes place annually before the Lunar New Year holiday to raise public confidence in Taiwan's defence capabilities.
"Our combat-readiness has no holidays," Huang Kai-sen, a lieutenant general, told AFP.
Tensions have been growing this month since China began operating new flight routes in the Taiwan Strait without consulting the island.
Taipei slammed the move as reckless and politically motivated, adding it could threaten the island's security and endanger flight safety.
It has retaliated by blocking requests to operate 176 additional flights between Taiwan and China by two Chinese airlines during the Lunar New Year -- the most important holiday for both sides, when tens of thousands of Taiwanese working in China want to travel home.
China Eastern Airlines and Xiamen Air on Tuesday blasted Taipei's decision as "unreasonable obstruction" for Taiwanese businesspeople and students wanting to return home for the holiday.
China Eastern also said in its statement there was "no so-called safety issues" as all the flight routes it uses had been assessed by experts.
China also sent its aircraft carrier the Liaoning through the Taiwan Strait twice this month.
China's defence ministry urged Taiwanese not to worry but the voyages were seen as shows of strength by Beijing.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)