Amid protests from Kuomingtang Party loyalists after the election, Teng-hui expressed his willingness to resign his powerful position as KMT chairman in September.
KMT vice chairman Lien Chan said he would also resign.
The decision was made during an urgent meeting of the the KMT's decision-making central standing committee at the party headquarters, as thousands of angry party members baying for Lee's blood clashed with riot police outside.
Party members have been demonstrating since Saturday night following the election defeat, blaming Lee and demanding his resignation.
KMT Secretary General Huang Kun-hui tendered his resignation Saturday within hours of the election defeat, and a senior member of the central standing committee and Taipei Mayor Ma Ying-jeou announced he would resign Sunday.
"I would like to be the match which sets ablaze the fire for the rebirth of the KMT," said Ma who also could not get to the urgent meeting because of the demonstrations.
Amid protests from Kuomingtang Party loyalists after the election, Teng-hui expressed his willingness to resign his powerful position as KMT chairman in September.
