Ting Chi’s goal midway through the first half proved enough to settle the tie at Campbelltown Stadium.
The other two teams in Group B of the AFC women’s Olympic qualifying tournament are heavyweights Australia and China.
Thailand next face China on Friday (Feb 7).
The tournament was originally scheduled to take place in Wuhan, the epicentre of the coronavirus outbreak, but was moved to Nanjing, another Chinese city and then Sydney.
In Group A are hosts South Korea, Vietnam and Myanmar. North Korea have withdrawn from the tournament.
The top two teams of each group will vie for two tickets to Tokyo 2020.
In Sydney, Thailand got off to a lively start but it was Taiwan who drew first blood.
They took the lead in the 19th minute after Wang Hsiang-huei’s scuffed initial effort skidded in the direction of Ting, who beat Tiffany Sornpao at her near post from 12 yards.
Naurephon Kaenson’s charges were dominant for long periods in the second half but could not beat Taiwan’s steely defence.
Thailand have never played in women’s football at the Olympics.