Taiwan's political climate, which has been the single most important influence in the development of the island's local languages, has changed dramatically since the mid1980s. One of most important consequences of Taiwan's democratisation is the Tai-yu language movement, which aims to revive this major local language and which symbolises the recent, rapid growth of local identity awareness. The promoters of the movement reject the official definition of Tai-yu as a dialect'. For them, bilingual education and the establishment of a Tai-yu pronunciation and writing system are crucial to the rebirth of the language. The movement has posed a threat to the status of Mandarin as the national language and the symbol of Chinese identity and political dominance of the ruling Nationalist Party. This paper analyses the official language policy, which had exalted Mandarin and suppressed other local languages, and the efforts to revive Tai-yu.The paper points out thatthe Tai-yu language movementshares with the official policy a language ideology which is based on the nation-state idea. The dynamics of the Tai-yu language movement reveals a pressing problem facing Taiwan: how to balance national cohesion with multilingualism and multiculturalism?