It comes after a bus inferno in July last year killed 25 Chinese holidaymakers on board, and is the latest in a series of deadly incidents that have tarnished Taiwan's safety record.
The Taiwanese passengers had been returning from a trip to a farm in the central region of Taichung when the bus veered off the motorway in the capital Taipei.
Local media said the top of the bus had been torn off and its occupants tossed onto the roadside.
Police are investigating whether the bus was speeding at the time, according to reports. The national fire agency said 32 people had been killed, with 12 still being treated in hospital, most with serious injuries.
Taiwan's Central News Agency said it was the worst road accident for 30 years.
"The passengers are all Taiwanese and mostly older people," said Chen Chih-min from Taipei City fire department, which confirmed the crashed vehicle was a sightseeing tour bus.
Victims' bodies were laid out at the crash site covered in white and blue cloths, and two cranes attempted to lift the toppled bus.
Taiwan President Tsai Ing-wen and Premier Lin Chuan gave their condolences.
Tsai said authorities must "make all efforts to save the injured people and properly handle the aftermath".
The bus was reported to be 19 years old and belonged to an agency that runs tours across Taiwan.
Responding to speculation about the condition of the bus and whether it was speeding, Taipei Deputy Mayor Teng Chia-chi said police were investigating and would "report when the cause is clarified".
It is the worst highway accident since 1986, when a bus fell into a river in central Taiwan, killing 42, CNA reported.
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