The defense ministry said that the two aircraft disappeared off the radar shortly after taking off from an air base in Hualien in eastern Taiwan.
The planes took off at around 7:30 p.m. and disappeared 13 minutes later, a defense ministry spokesman said.
Mists hampered rescue operations for the two pilots and one co-pilot and their aircraft, an RF-5 surveillance plane and a two-seater F-5F trainer.
The missing pilots are Capt. Hsiao Wen-ming, 29, flying the RF-5 and Lt. Col. Chang Chien-kuo, 41, pilot of the two-seater F-5F. Chang's co-pilot is Maj. Wang Hong-hsiang, 36.
The Central News Agency reported witnesses said they saw two aircraft crash into mountains and burst into flames.
"We were fishing at the seaside when suddenly airplanes flew over our heads and a moment later we heard a loud bang and the whole mountain was set on fire," one witness said.
Other witnesses said they saw what looked like pieces of aircraft on the main coastal highway.
The F-5F is based on the Northrop F-5F Tiger fighter but built in Taiwan up to 1986. Taiwan's RF-5 is the Northrop Tigergazer RF-5E.
The crashes come as two U.S. senators push for selling more fighters to Taiwan, CNA said.
U.S. Sen. John Cornyn, R-Texas, and U.S. Sen. Robert Menendez, D-N.J., introduced legislation that would require the Obama administration to sell at least 66 new F-16 C/D multi role fighter jets to Taiwan.
"The Taiwan Airpower Modernization Act of 2011 will help bring the United States into compliance with its legal obligations under the Taiwan Relations Act of 1979 to provide Taiwan with the military equipment it needs to maintain its self-defense capabilities," a statement from Cornyn's office said.
The bill would provide Taiwan with critically needed aircraft "to strengthen its self-defense capability against the increasing military threat from China."
The U.S. government has said it would make a decision on the sale by Oct. 1.
"This sale is a win-win, in strengthening the national security of our friend Taiwan as well as our own, and supporting tens of thousands of jobs in the U.S.," Cornyn said in the statement.
"Saying no here would mean granting Communist China substantial sway over American foreign policy, putting us on a very slippery slope."
Menendez also said Taiwan needs the aircraft to improve its defense against China.
"Providing the military resources Taiwan needs is in the vital security interest of Taiwan, the national security interest of the United States and is compelled by the Taiwan Relations Act," Menendez said in the statement.
"Delaying the decision to sell F-16s to Taiwan could result in the closure of the F-16 production line, which would cost New Jersey 750 manufacturing jobs."