There has been an increasing trend with regard to the pursuit of institutional diversity and differentiation of higher education in European countries. A similar development also can be observed in Taiwan since the 1990s. With the publication of the“General Consultation Report on Education Reform”officially endorsed by the Executive Yuan, higher education institutions in Taiwan are encouraged to diversify and differentiate further in terms of types and functions with an attempt to meet the diverse demands of the non-traditional background students. The purpose of this paper, reflecting the preceding stated development, aims to explore the possible development of higher education in Taiwan with respect to institutional diversity and differentiation. The main attention has been paid to the following issues: to review historical development of higher education, to examine dominant policy documents regarding institutional diversity, and to design feasible “conceptual blueprint” and in turn stimulate debates and analytic discussion about Taiwanese higher education future. To sum up, two models are considered: “integrated binary mode” and “divided binary mode”, which are more likely to facilitate the further development of a diversified and differentiated higher education system in Taiwan.