The U.S. State Department said in a statement that "self-imposed sanctions" were introduced decades ago to "satisfy" the Chinese government on the mainland, the State Department said in a statement.
These rules are now “null and void”.
The move would anger China and increase tensions between Washington and Beijing.
It comes after the Trump administration entered its last days before the inauguration of President Joe Biden on January 20th.
China considers Taiwan an isolated province, but Taiwanese leaders have argued that it is a sovereign state.
Relations between the two have soured and there is a constant threat of violent arson that could lead to tensions in Taiwan's ally the United States.
In a statement on Saturday, Mr. Pompeo said the State Department had imposed "complex sanctions." Restrict communication between American diplomats and their Taiwanese allies.
"Today I am announcing that I am lifting all these self-imposed sanctions," he said. "Today's statement recognizes that U.S.-Taiwan relations should not and should not be severed by the self-imposed restrictions of our permanent bureaucracy."
He added that Taiwan was a vibrant democracy and a reliable US partner and that sanctions were no longer in effect.
Last August, Alex Azar, the US Secretary of Health and Human Services, was the highest-ranking US politician to meet on the island for decades.
In response, China called on the United States to call its policy "one China."
Although there are no formal defense agreements with countries like Japan, South Korea and the Philippines, the United States sells arms to Taiwan.

China and Taiwan were divided during the civil war in the 1940s.
Beijing has long sought to limit Taiwan's international activities, and both have high hopes for influence in the Pacific.
Tensions have risen in recent years, and Beijing has not ruled out using force to retake the island.
Although Taiwan has only a handful of countries officially recognized, its democratically elected government has strong trade and informal ties with many countries.
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