Her visit to Taiwan's outlying Kinmen island -- located just a few miles from China -- comes as relations between Taipei and Beijing have plummeted in recent years.
Laying a wreath to commemorate the soldiers who died during the 1958 Taiwan Strait Crisis, Tsai recalled how the servicemen and civilians "fought with one heart and persisted in repelling the enemy forces who tried to invade".
Fighting broke out on August 23, 1958, when Chinese forces conducted an intense bombardment of Taiwan's outlying Kinmen and Matsu islands in a bid to dislodge the Nationalists -- who had left the mainland after the end of the Chinese Civil War.
Then-US president Dwight D. Eisenhower ordered reinforcements to supply their Taiwanese allies, and unable to take the islands or shell the Nationalists into submission, Beijing announced a ceasefire.
"They protected our homeland and thus gave us a chance to head towards the path of democracy and freedom," Tsai said in a brief speech.
"There is no Taiwan if not for our victory."
She also reiterated Taipei's commitment to "peace and stability in the Taiwan Strait".
"In order to maintain peace, we must strengthen ourselves first," Tsai said, adding that her government will "improve our defence combat ability and resilience".
China sees Taiwan as its own territory and has vowed to take it one day -- by force, if necessary. Because Tsai does not accept China's view, Beijing has refused to engage with her government in any dialogue.
Military and political pressures against Taipei have ramped up in recent years, with China conducting aerial and naval exercises whenever high-level Taiwanese politicians meet with other countries, particularly the United States.
Over the weekend, China held air and sea drills around the island, which were launched in an apparent show of force after Lai's recent stopovers in the United States.
- 'Don't want war again' -
Wednesday's anniversary event was also attended by veteran soldiers and Hou Yu-ih, the presidential candidate from opposition Kuomintang party -- largely regarded as pro-Beijing compared to Tsai's ruling Democratic Progressive Party.
"Peace between the two sides is what we all want," he said, echoing Tsai on Kinmen's "sacrifice, dedication and efforts" during the 1958 crisis.
"I've always stressed that if the Taiwan Strait is stable, Taiwan is safe and people can have peace of mind," said Hou, who is up against frontrunner Vice President Lai Ching-te in the upcoming presidential election.
Also on Kinmen was Foxconn founder Terry Gou, who has voiced presidential ambitions and been conducting campaign-like events, but does not have the backing of either major party.
"Sixty-five years later, the situation on both sides of the Taiwan Strait is dangerous and could lead to chaos," Gou said in a speech at a separate event.
"How have we arrived at today's situation of continuous military exercises... and warships shuttling through with threats?" he said, calling for "both sides of the Strait" to reopen dialogue.
Veterans attending Wednesday's ceremony -- who described the island being engulfed "in flames and smoke" during the 1958 battle -- expressed hope for continued peace.
"We want to peacefully coexist with mainland China. We don't want war again," 88-year-old war vet Lien Chen-chen told AFP.
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