The scenario of the maneuver, the first of two rehearsals for a major exercise to be held on August 25, was that Taiwan troops had failed to hold off an amphibious landing by Chinese forces, TVBS cable television showed.
As Taiwan troops tried to stop simulated Chinese forces from pushing further inland, a fleet of US-made Cobra gunships fired laser-guided Hellfire missiles while howitzers and tanks fired on targets.
China, which has some 600 ballistic missiles aimed at the island, has itself been staging large-scale military exercises on Dongshan island off its southeastern coast.
The drill came as Defense Minister Lee Jye confirmed a report that in a recent computer-simulated exercise, Taiwanese troops were wiped out 130 hours after the People's Liberation Army (PLA) started invading.
The Apple Daily said the blitz was simulated as happening in 2006, the year when Taiwanese President Chen Shui-bian is scheduled to push for a new constitution, which Beijing has warned against.
After the first day of the Chinese "attacks", Taiwan's airports, bunkers, harbours and key government buildings were destroyed by extensive bombings featuring 700 ballistic missiles.
The simulated battles ended when the PLA captured the capital Taipei in the sixth day of the attacks.
Since pro-independence Chen was re-elected in March Beijing has stressed its long-standing vow to take Taiwan by force should the island try to declare formal independence.
The two sides split in 1949 at the end of a civil war.