"His 30-year-long devotion to filmmaking has greatly influenced Asian cinema and made considerable contributions to enhance the global status of Asian cinema," it said in a statement.
"He is renowned for seeking fresh ways of communicating with his audience... We can find the root of his endless spirit of challenging himself and the borderlines of art in his earlier works in the 1990s."
Malaysian-born Tsai is best known for "Vive L'Amour" that won the Golden Lion (best picture) award at the Venice Film Festival in 1994, and "The River" that won the Silver Bear/Special Jury Prize at the 1997 Berlin International Film Festival.
The 52-year-old has also won numerous awards with other films.
He is considered a leading exponent of the "Second New Wave" -- a group of Taiwanese directors in the 1990s who produced films with realistic and sympathetic portrayals of life rather than melodramas or action pictures.
The festival, held in the southern port city of Busan since 1996, will be staged from October 7-15 this year.