The lawmakers comfortably passed a law on Friday, allowing same-sex couples to form "exclusive permanent unions" and a second clause that would let them apply for a "marriage registration" with government agencies.
The vote is a major victory for the island's LGBT community who have campaigned for years to have similar of equal marriage rights as heterosexual couples and places the island at the vanguard of Asia's burgeoning gay rights movement.
In recent months conservatives had mobilised to rid the law of any reference to marriage, instead putting forward rival bills that offered something closer to limited same-sex unions. But those bills struggled to receive enough votes.
Hundreds of gay rights supporters on Friday gathered despite heavy rain near the parliament building in the capital, Taipei, as legislators were set to vote on a series of bills that could offer same-sex couples similar legal protections for marriage as heterosexuals.
The vote came after Taiwan's top court ruled that not allowing same-sex couples to marry violates the constitution. Judges gave the government until May 24 this year to make the changes or see marriage equality enacted automatically. But they gave no guidance on how to do that.