The small west African nation suspended ties with China in 1997, when it chose to officially recognise Taiwan, which split from the mainland in 1949 after a civil war.
Beijing has repeatedly asserted its belief that there is only "one China" and that the island remains part of its territory awaiting reunification.
Tensions between the mainland and what it refers to as a "renegade province" have heightened since president Tsai Ing-wen, who leads Taiwan's pro-independence Democratic Progressive Party, took office in May.
"We welcome Sao Tome and Principe back onto the correct path of the one China principle," the Chinese foreign ministry said in a statement on its website.
"Persisting in the one China principle is the direction of international popular sentiment and an irresistible trend," it added.
Sao Tome's decision leaves Taiwan with formal diplomatic ties to only 21 states, including just two in Africa -- Swaziland and Burkina Faso.
Sao Tome's decision follows a precedent shattering congratulatory phone call from Tsai to Trump, which angered Beijing.
The billionaire politician further raised the temperature among the Chinese leadership by publicly questioning US reluctance to recognise Taiwan.
"I don't know why we have to be bound by a one China policy unless we make a deal with China having to do with other things, including trade," he told Fox News earlier this month.
Tsai is preparing for a trip next month to meet with diplomatic allies in Latin America, where she is expected to pass through the US, which may irk China.
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