The TransAsia ATR 72-600 plane with 58 people on board was on a domestic flight when it hit a road bridge in the capital Taipei.
The moment of impact was captured on a passing driver's dashcam, and shows the aircraft's wing clipping a taxi before it disappears out of view.
State media said the plane came down in the Keelung River about 25 metres (30 yards) from the shore.
According to reports, it took off from nearby Sungshan airport at 10.53am local time and lost contact with air traffic control two minutes later.
Also last year, a Malaysia Airlines jet disappeared and one of its sister planes was downed over Ukraine with a combined loss of 539 lives.
Last July a TransAsia ATR-72 crashed while attempting to land on the island of Penghu off Taiwan, killing 48 people and injuring 10.
The plane involved in Wednesday's crash was one of eight ATR 72-600s ordered by TransAsia in 2012.
The 72-seater aircraft are mainly used to connect Taipei with smaller cities and islands.
No reasons have been given for the crash, although a 'flameout' - caused by a fuel supply problem or faulty combustion - is thought to be a possibility.
According to an air traffic control recording at liveatc.net, the last communication from one of the aircraft's pilots was "Mayday Mayday engine flameout". TransAsia is due to give a news conference later.
The crash is the latest in a string of mishaps to hit Asian carriers in the past 12 months.
In December an AirAsia jet bound for Singapore crashed soon after taking off from the Indonesian city of Surabaya, killing all 162 people on board.
It was heading for the Kinmen islands, and as many as 31 passengers were Chinese, three of them children. Kinmen's airport is a common link between Taipei and China's Fujian province.
The other 22 passengers, including one child, and five crew were from Taiwan.
Wu Jun-hong, a Taipei fire department official who was coordinating the rescue operation, said 28 people were pulled from the plane.
A number were unaccounted for, and were still in the fuselage or had been swept down river, he said.
"At the moment, things don't look too optimistic," Mr Wu told reporters at the scene. "Those in the front of the plane are likely to have lost their lives."
Television footage showed survivors wearing life jackets wading and swimming clear of the wreckage, which was surrounded by rubber boats.
Others, including a young child, were taken to safety by rescuers, who could also be seen pulling carry-on luggage from an open door.
The Ministry of National Defence said it had sent 165 people and eight boats to the rescue scene, joining fire department crews.