The plane, carrying 58 people, crashed into buildings after a failed attempt to land at Magong airport.
The other 10 people on board were hurt. Two French nationals were among the dead, officials said. No crew members are thought to have survived.
Family members were flying to Penghu on Thursday, Taiwan media said.
Minister of Transportation Yeh Kuang-shih and aviation officials also flew to the island to start an investigation into the disaster, Taiwan's CNA news agency said.
The ATR-72 TransAsia Airways plane crashed as it flew from Taiwan's southern city of Kaohsiung to Penghu, a popular tourist destination in the Taiwan Strait.
It was Taiwan's first fatal air crash in more than a decade and came after Typhoon Matmo struck, bringing torrential rain and high wind.
The plane crashed on its second attempt to land at the airport. It lost contact with controllers after telling them it was going around again. The aircraft then came down in Xixi village outside the airport.
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