The Democratic Progressive Party formed in 1986 to resist the then-authoritarian rule of the Nationalists, and it now embraces a list of popular liberal causes.
Elsewhere over the weekend, voters in China's semi-autonomous region of Hong Kong elected a pro-establishment politician to the legislature in a by-election called after the incumbent was ejected from the body for "improper oath taking", one of six pro-democracy legislators ousted on that charge.
In the run-up to the elections, Ms Tsai and her Government said repeatedly China was trying to sway voters with "political bullying" and "fake news" - accusations that Beijing denied. Taiwan is not recognized as a country by most countries; although it is a de facto independent state, China sees it as a renegade province.
Still, Tsai's caution regarding key domestic issues such as labor reforms and same-sex marriage - rather than her dealings with China - were seen as key causes for the DPP's defeat. Her premier also offered to resign, and the Central Election Commission head quit over the slow processing of ballots.
"Today, democracy taught us a lesson", Tsai said.
"But this is not support for the Kuomintang from the people".
To win back support, several analysts said Tsai should move closer to the USA, which sells weapons to Taiwan to defend against forceful unification by the mainland.
The mayoral posts in Taichung and Kaohsiung cities were won by the Kuomintang party, which is more friendly towards China, according to Global News.
Ma Xiaoguang added that China would continue "to resolutely oppose separatist elements advocating "Taiwan independence" and their activities".
"The election shows that the Tsai administration has betrayed Taiwan's interests and become a troublemaker whose actions have drifted farther away from the practical needs of the Taiwan people and the historical truth of the consensus there is only one China", said an editorial in state newspaper China Daily. It asks voters about whether Taiwan should change its name at worldwide sports events from Chinese Taipei to Taiwan, a move Beijing opposes. China recently conducted military drills around the island and tried to convince Taiwan's diplomatic allies to abandon it. Our efforts weren't enough and we let down all our supporters who fought with us.
Rights activists say the referendum is "discriminatory" as it goes against a 2017 court ruling that current laws violate the right to freedom of marriage and equality.
LGBT activists in Taiwan fear their newly won right to marriage equality is under threat, while the president is battling for her political future after a wide-ranging vote that saw the island swing towards conservatism.
Courts will still consider local marriage licensing offices in violation of the law by May 2019, if they refuse same-sex couples, a Ministry of Justice spokesperson said last week.
Meanwhile other organisations welcomed the result. "Family values and inclusion of those values in the education of the next generation are mainstream public opinion that the government should heed".
And in a highly symbolic but potentially impactful referendum, voters were also asked whether they wish to compete in future worldwide sporting events, including the 2020 Tokyo Olympics, as "Taiwan" instead of "Chinese Taipei" - the name the island is required to use at China's insistence.
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