The quake hit at 2:44 pm (0644 GMT) about 50 kilometres (30 miles) north of the city of Taitung at a depth of 10 kilometres, the USGS said, Hindustan Times reported.
Its initial strength was given as 7.2-magnitude but USGS later downgraded it to a 6.9-magnitude quake.
At least one building collapsed in the town of Yuli according to Taiwan's semi-official Central News Agency.
A video posted by CNA showed panicked residents running towards the building which had caved in on itself and sent up a thick cloud of dust.
Shaking was also felt in the capital Taipei, an AFP reporter said.
A 6.6 magnitude quake hit the same region on Saturday and there have been multiple tremors since with minimal damage in what is a mountainous, sparsely populated rural region.
But Sunday's quake was much stronger.
Japan's Meteorological Agency issued a tsunami advisory to remote islands near Taiwan.
Waves as high as one metre were expected to arrive around 4 pm (0700 GMT), it added.
Live TV footage from the affected islands did not immediately show clear signs of high waves.
The China Earthquake Network Centre said tremors were clearly felt in coastal areas including Fujian, Guangdong, Jiangsu and Shanghai.
Taiwan is regularly hit by earthquakes as the island lies near the junction of two tectonic plates.
The island sits on the Pacific "Ring of Fire", an arc of intense seismic activity that stretches through Southeast Asia and across the Pacific basin.
Taiwan's deadliest ever quake was a 7.6-magnitude jolt in September 1999 that killed over 2,400 people.
ZZ/PR