The Taipei Literature Award was set up to encourage the creation of literary works and to promote writing. Founded in 1998, the award is divided into two parts: a competition and a grant.

The competition has five categories: novel, prose, modern poetry, classical poetry, and stage script, while the writing grant, the first of its kind in Taiwan, involves two rounds of selection. In the first round, three prospective works are shortlisted on the basis of the candidates’ writing plans, and each writer is awarded TWD200,000. The second round takes place a year later when the three works are complete. A winner is selected to receive a bonus of TWD400,000 in recognition of their work and in order to provide substantive support during the long, difficult creative process. Over the years, Taipei Literature Award writing grants have enabled many outstanding writers to create some remarkable works.

In 2011, the Awards were expanded with the addition of the performance production grant to help discover and cultivate outstanding stage scripts. First prize winners in the stage script category can apply to the Department of Cultural Affairs for a performance production grant of up to TWD300,000.

The Taipei Literature Award uses grants, publication, and interdisciplinary performances to encourage literary talents to continue to write. In recent years, applications have come from across Asia, Europe, and the United States, and the Award has become a pivotal international city-based literary award in these regions and in the Chinese cultural world.