The military sent reconnaissance aircraft to observe simulated incoming ships, and tanks fired rounds as the "enemy" landed at the eastern port of Hualien.
Attack helicopters fired flares and F-16 fighter jets launched simulated assaults, backing up the ground battle against the "enemy" troops -- who wore red helmets to differentiate themselves.
The ministry did not specify that the annual drill simulated an invasion by China but said it was intended to "show determination to safeguard peace in the Taiwan Strait and national security".
The Taiwan Strait separates the island from China.
Tsai last month warned against what she called Beijing's "military expansion" -- the increase in Chinese air and naval drills around the island since she came to power in May 2016.
There is also a dispute about new flight routes by Chinese airlines in the strait. Beijing sees self-ruled Taiwan as part of its territory awaiting reunification, by force if necessary.
Cross-strait relations have turned frosty since the inauguration of Tsai, who refuses to acknowledge self-ruling, democratic Taiwan is part of "one China". The drill on Tuesday takes place annually before the Lunar New Year holiday to raise public confidence in Taiwan's defence capabilities.