Most of the studies on the postwar US policy toward China regarded Taiwan and the Mainland as a unity. This article attempts to revise the Sino-American relationship from bipartite to tripartite involving the US, China and Taiwan as separate entities. Moreover, using the research approach of Cold War and decolonization, this article explores the characteristics of the Taiwan independence movement after the February 28 incident, the attitude of the US government, and the response of Kuomintang to this movement. Unlike the pro-communist left-wing movement in other Asian countries, the Formosan League for Re-emancipation (FLR), due to scarcity of resources, yearned for and welcomed US assistance. Hence, its independence movement showed characteristics of anti-communist, pro-American, and “dependent decolonization.” The US government had discussed on separating Taiwan from China since 1948. They hoped to see “a Taiwanese autonomous movement which is in the US national interest,” rather than the US unilaterally intervening in the Taiwan issue and taking on all responsibilities and consequences. Under the Cold War structure, the US government considered it costly to support the independence movement of Taiwan. After evaluation, the US shifted gradually its Taiwan policy to pressuring the Kuomintang (KMT) government to undertake political reforms and maintain stability, which was considered enough to prevent the Communist spread. Moreover, the US inclined to resolve the Taiwan issue through the UN mechanism, which allowed the international community to share the responsibility. In September 1950, the US proposed including the “question of Formosa” in the agenda of the UN General Assembly. In face of the CCP threat and the US policy sway, the KMT government quickly arrested FLR members. However, in response to the US concerns and in order to maintain friendly relations, a lighter sentence was imposed on the members of the Formosa independence movement. Since then, the KMT government cooperated with the request from the US, strived to introduce political reform and achieve economic stability, aiming to reestablish itself in Taiwan.