The East Asian tigers relied upon their developmental states (DSs) to achieve extraordinary economic development in the postwar era. Whether these DSs would remain effective after democratization occurred has been a subject of great interest. This paper addresses this question relating to the case of Taiwan. The formation and make-up of Taiwan's DS is discussed first from a historical perspective. It is argued here that the DS's will to develop came from modern Chinese nationalism, which had been formed during China's lengthy process of facing up to the challenge from the West since the Opium War. Taiwan's DS consists of the following features: the ruling elite's will to develop, a capable economic bureaucracy with embedded autonomy, an industrial policy framework with an aim of further overall growth, and an arrangement to coordinate policies to give development top priority. All these facets have been affected by the process of democratization in the last two decades. By the 1980s, the success of Taiwan's development has brought great pressure for it to transform the original economic model and the political institutions at the same time. This paper discuss the impact of democratization on Taiwan's DS in four aspects: in terms of broadening policy objectives to include social concerns besides that of economic development, it is found that the fight over social issues have become too partisan for the society to form a policy consensus; as to whether the policy objective is furthering of overall interests, the new mode of political competition has sometimes led to pursuit of divisive and partisan ways of distributing resources; regarding the guiding principle of economic policy, neo-liberalism has replaced developmentalism as the guide because the democratic movement had adopted neo-liberalism in its fight against authoritarian rule; and finally, because the newly formed democracy discourse is mainly for forging an independent nation and against integration with Mainland China, it hence fails to provide a vision and a feasible future development plan for the Taiwan economy. In sum, the transformation of Taiwan's DS has been less than successful.