State-run Taipower said a failure occurred at Kaohsiung's Sinta Power Plant, the island's third-largest coal-fired station that supplies about a seventh of Taiwan's electricity.
Power outages were reported in several parts of Taiwan on Thursday, after the presidential office called a power plant "an incident".
The blackout occurred after 9 a.m. (0100 GMT) across the island, from the capital Taipei to central Taichung City and southern Pingtung County, the report said.
The power failure occurred as President Tsai Ing-wen prepared to meet with former US Secretary of State Mike Pompeo.
They also came a day after a delegation of former US security officials visited, a visit condemned by Beijing, which views Taiwan as its own territory and denounced any official ties of the island with other countries. .
The presidential office said preliminary investigations showed the blackout was caused by "an incident" at a power plant in the southern city of Kaohsiung.
While power supply to the presidential office was normal, it said a scheduled live stream of Tsai's meeting with Pompeo had been cancelled.
"President Tsai has directed the cabinet and relevant agencies to clarify the cause of the incident and to resume power supply as soon as possible," the statement said.
State-run Taipower said a failure occurred at Kaohsiung's Sinta Power Plant, the island's third-largest coal-fired station that supplies about a seventh of Taiwan's electricity.
It then went on to visit an ultra-high voltage station in neighboring Tainan, which led to the blackout, it said.
About 5.5 million homes across Taiwan lost power, the company said, of which 4 million have been restored.
Economic Minister Wang Mei-hua told reporters that the Sinta plant has been cut off from the power system since the incident, with hydroelectric power and other power plants being brought online to supply electricity.
TV footage showed police officers directing cars as traffic lights failed and some shops were forced to remain closed due to lack of electricity.
Taiwan High Speed Rail said several of its trains were affected by the power outage.
The Taiwan Railway Administration said some of its trains operating in southern Tainan, Pingtung and central Nanatu were delayed or suspended.
The island sometimes experiences major power outages, especially during the hot season when there is a surge in demand.
In 2017, Taiwan's economic minister resigned following outrage over a massive power failure across the island, affecting more than six million homes.
Blackouts hit last May as well as demand spiked during the heatwave.