At 5pm (Thailand time), Meranti was 60 kilometres south-southwest of the offshore Penghu island, packing gusts of up to 227 kilometres per hour.
Hengchun's observation station recorded the strongest winds in its 120 year history earlier Wednesday, according to Taiwan's Central Weather Bureau.
"It is the strongest typhoon to hit Taiwan in 21 years in terms of maximum sustained wind near the centre," said forecaster Hsieh Pei-yun.
Southern Kenting, a tourist destination known for its white-sand beaches, was battered by winds and floods.
Residents in a fishing port in southern Taitung county woke up to find that a small lighthouse had disappeared and believed that powerful winds blew it off into the sea, as waves almost 10 metres high lashed the shore in the area, reports said.
Trucks were overturned and roofs were blown off while electricity poles and trees were uprooted by winds in some southern areas.