As a result of the change, 254 military prisoners were transferred Thursday from Tainan Military Prison -- the military's only prison -- to civilian prisons.
Among those transferred to civilian prisons were three two-star generals, two one-star generals and former navy Capt. Kuo Li-heng. Kuo was jailed for his role in brokering kickbacks in the high-profile Lafayette frigate deal in the 1990s.
Dozens more military prisoners likely will be moved, Taiwan's Central News Agency reported.
The Ministry of Justice said the transfers were taking place under the revised Code of Court-Martial Procedures that came into force Thursday.
CNA said the court martial system was revised hastily after the death of army Cpl. Hung Chung-chiu July 4 following a serious of irregularities, disregard for military rules and procedures as well as abuses of power.
Hung, 24, was a conscript who died in suspicious circumstances while serving a detention sentence in a 269th Mechanized Infantry Brigade barrack.
The incident triggered calls for improved human rights and reforms in the military. It also resulted in the July 29 resignation of Defense Minister Kao Hua-chued, 66, and an apology from President Ma Ying-jeou,
The MOJ's Agency of Corrections said the transfers occurred without incident under heavy security that included three anti-riot vehicles manned by 150 armed military police.
The agency said another 53 military prisoners will be transferred to civilian prisons in the second phase of the program in five months. Nearly 180 prisoners are awaiting investigation or rulings in their cases.
Kuo was sentenced in August 2010 to 15 years in prison for taking bribes in a controversial deal to buy French frigates in 1991. He allegedly began accepting as much as $17 million in kickbacks from arms dealer Andrew Wang to facilitate the deal.
China Times reported in November a Taipei court ruled against the Ministry of National Defense in a civil lawsuit filed to seek compensation from individuals sentenced for taking bribes during the ministry's purchase of the Lafayette frigates from France.
The 1991 procurement of six naval frigates by the navy from French company Thomson-CSF was complicated by a procurement kickback scandal that came to light after the body of naval officer Yin Ching-feng was found floating off the coast of northern Taiwan in December 1993.
The ministry took Kuo, his brother Kuo Wen-tien and Wang to court in 2007 to seek $880 million in compensation for extra expenses accrued during the purchase of the warships.
The China Times report said Kuo's brother, guilty of helping launder money that was deposited in the pair's bank accounts in Switzerland, was sentenced to two years in prison.
Wang remains at large and has been wanted by Taiwanese authorities on murder charges since September 2000.
Kuo and his fellow officer inmates were transferred to Taipei Prison in Kueishan, Taoyuan County, where they won't receive preferential treatment as they had at Tainan Military Prison, Deputy Justice Minister Chen Ming-tang said.
"All six former senior military officers will be treated in line with the principle of equality," Chen said.
China Times reported in July that military officials said the suspicious death of Hung in July will affect Defense's efforts to recruit more servicemen and women as Taiwan moves to an all-volunteer force by 2015.