Seven people have been confirmed dead so far - including a 10-day-old baby and young girl, a 55-year-old woman and a 50-year-old man, according to reports.
Dozens of residents are reported to be trapped in a block in the two million-population city of Tainan.
Firefighters said 221 people have been rescued so far from the 17-storey building that was home to 256 people.
Formosa TV said 37 people were rescued from another seven-storey property.
A bank and a market are also reported to have toppled.
Reporters said they could hear cries of help from inside one destroyed building.
Tainan resident Brent Brown told Sky News: "I awoke to my girlfriend saying, 'Oh my god'.
"I could feel the sensation of being thrown about and heard things crashing in the living room and kitchen of the apartment.
"The first thought that crossed my mind was that the building was either falling or was going to fall.
"I was worried those were the last moments. I hugged my girlfriend and told her I loved her, expecting the worst."
A 71-year-old neighbour of one collapsed building, who gave his name as Chang, said: "I was watching TV and after a sudden burst of shaking, I heard a boom.
"I opened my metal door and saw the building opposite fall down."
The US Geological Survey said the quake struck at a depth of six miles (10km), about 27 miles (43km) southeast of Tainan.
Tremors were felt in the capital Taipei, on the other side of the island.
The quake was initially reported as having a magnitude of 6.7, but was later downgraded to 6.4.
Taiwan President Ma Ying-jeou said authorities were not clear on the extent of the disaster.
The disaster situation is not very clear yet," he said. "We will do our utmost to rescue and secure (survivors)."
At least five aftershocks of 3.8 magnitude or more shook Tainan 30 minutes after the initial quake.
The Pacific Tsunami Warning Center said a tsunami was not expected.
Taiwan lies between two tectonic plates in the Pacific Ring of Fire and is regularly hit by earthquakes.
In 1999, a 7.6-magnitude quake killed around 2,400 people.
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