Taiwan's ambassador to Panama was finally allowed to assume his post Tuesday six months after arriving in the Central American country, amid a diplomatic rift, the Taiwanese foreign ministry said.
Diego Chou flew to Panama in January, but attempts to deliver his letter of credence were repeatedly snubbed by the Panamanian government, the ministry said.
Panama is among 23 nations that recognise Taiwan rather than China, from which the island split in 1949 after a civil war.
But there has been speculation Taipei could lose out in the long-running tug of war with its giant neighbour, with Panama reportedly considering shifting diplomatic recognition to Beijing.
And Taiwan media said Panamanian President Ricardo Martinelli had accused the island of interfering in Panama's internal affairs after foreign minister Timothy Yang met one of the president's rivals on a visit.
Taipei has flatly denied any interference.
"The misunderstanding has been solved after a thorough communication," Taiwan's foreign ministry said in a statement Tuesday.
Taiwan and China have in the past engaged in "dollar diplomacy", offering generous financial packages to ensure the loyalty of governments, especially in Africa, Latin America and the Pacific.
However, Taipei has ditched the controversial measures since Ma Ying-jeou of the China-friendly Kuomintang party came to power in 2008 on platform of beefing up trade and tourism links and adopting a "diplomatic truce" with China.