Lanyu was designated to be a national park in mid-1980s, when the authoritarian regime was in a stage of transformation. In the beginning, the policy gained extensive support from the public; however, with the annulment of the martial law in 1981, a variety of obstacles appeared due to the specific historical background of Lanyu such as different values and opinions on the environment, along with antagonism caused by varied social ethnic ideology and discontent toward the state interventions which eventually led to an outcry to boycott the formation of the national park in 1988. In 1993 the government decided to temporarily suspend the implementation of the park. The paper aims at analyzing the policy-making process related to the national park from the aspect of the interaction between the state and society. Factors that affected the evolution of the policy are also examined. The paper concludes that failure in the attempt to make Lanyu a national park was due to combined consequences of the opposition of the local Yami caused by the inadequate government policies, active involvement of interest groups, and the attitude of the Construction and Planning Administration. The implication for the future development of Lanyu Island is pointed out in these analyses.