Lawmaker Johnny Chiang won more than two-thirds of an internal vote to become the youngest ever Kuomintang (KMT) chairman at 48, beating former Taipei mayor Hau Lung-bin.
He thanked supporters in a short speech that hailed his ballot victory as the party's "critical first step at reforming".
Chiang's KMT suffered a landslide loss to popular incumbent President Tsai Ing-wen in January, in a result viewed as a rebuke of Beijing's campaign to diplomatically isolate the self-ruling island.
China has ratched up pressure on Taiwan since Tsai was first elected in 2016, as her independence-leaning Democratic Progressive Party refuses to acknowledge that Taiwan is part of "one China".
Beijing still claims Taiwan as a breakaway province awaiting reunification, by force if necessary.
The KMT has traditionally side-stepped frictions with China by accepting the "one China" concept without specifying whether Beijing or Taipei is its rightful representative.
Chiang has called for the party to rethink its position in order to attract the younger voters needed to win back office.
Beijing's Taiwan Affairs Office congratulated Chiang in a statement late Saturday, adding that it looked forward to the KMT "cherishing and maintaining" its existing policy.
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