Taiwan Foreign Minister Joseph Wu confirmed the severing of ties at a news conference in Taipei and said it would close its embassy in Honduras and withdraw its ambassador there.
Earlier, the Honduran foreign ministry said in a post on Twitter: "The government of Honduras recognises the existence of just one China".
"The government of China is the only legitimate government that represents all of China ... Taiwan is an inseparable part of Chinese territory."
The flag of Honduras was removed from inside Taiwan's foreign ministry, according to a Reuters witness.
The Honduran foreign minister travelled to China this week to open relations after President Xiomara Castro said her government would start ties with Beijing, Honduras being one of only 14 countries to formally recognise Taiwan.
China views Taiwan as one of its provinces with no right to state-to-state ties, a view the democratically elected government in Taipei strongly disputes.
The decision by Honduras to cut ties prompted warnings from the de facto US embassy in Taipei on Saturday that China often makes promises in exchange for recognition that remain unfulfilled.
After a recent meeting with US officials, the Honduran foreign minister said the US "respects" Honduras' decision to move towards establishing formal diplomatic ties with China.
Taiwan disputed the foreign minister's comments.Â
