Wu Ming-yi -- whose novel "The Stolen Bicycle" was among the 13 books longlisted for the prestigious prize -- had protested after his nationality on the Man Booker website was revised from "Taiwan" to "Taiwan, China".
The change was prompted by a complaint from the Chinese embassy in Britain, according to the London-based award organiser Booker Prize Foundation.
Taiwan is a self-ruled democracy but China views it as part of its territory, to be brought back under its control using force if necessary.
Beijing rejects any recognition of Taiwan's sovereignty and has recently rebuked foreign firms -- including Zara, Marriott, and Delta -- for listing Taiwan as a separate country on their websites.
But the organisers said on Wednesday it has decided to change Wu's nationality back to "Taiwan" after consulting interested parties and British government advice.
"The country/territory of longlisted authors and translators will appear, and Wu Ming-yi will be listed as 'Taiwan,'" the Booker Prize Foundation said in a statement.
In what may be a compromise, "territory" was a new addition to the Man Booker International Prize nominee list appearing on its website Wednesday.
"The prize is not about defining nationality; all global citizens are eligible, provided they are published in translation in the UK," it added.
The foundation has notified the Chinese embassy but did not consult with them.
Taiwan's foreign ministry thanked Man Booker on Wednesday for the reversal and criticised Beijing.
"China is putting pressure on Taiwan's international space on all fronts and at all times, both in official and civil situations," the ministry said.
Wu's novel, written in Chinese and translated into English, is about a novelist searching for his missing father's bicycle.
The shortlist for the prize will be announced on April 12 and winner on May 22.
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