Ethnopharmacology, the study of ethnic use of drugs, opens up the crucial gateway to understanding and promoting traditional medicine in the new age. Taiwan is a unique region where traditional medicine and herbal therapeutics have been benefiting its people of multiple races for centuries. This article overviews Taiwan’s indigenous traditional medicine and the emerging status of ethnopharmacology study, and outlines the global scenario of the inheritance and development of traditional medicine. In such a scope of knowledge protection, this article particularly highlights the challenges with bioprospecting and biopiracy, and summarizes the current measures for protection of traditional knowledge in Taiwan. Finally, based upon these analyses, we propose rational strategies for promoting Taiwan’s ethnopharmacology, from multiple angles of resource, economy, policy and law. We conclude that four measures, namely (1) protecting the natural environment of biodiversity, (2) avoiding unnecessary conflicts caused by bioprospecting and biopiracy, (3) strengthening the international collaboration, and (4) upgrading the legal system of traditional intelligence, would be the right paths for Taiwan to protect its invaluable heritage of traditional medicine and the knowledge of ethnopharmacology therein.