"It's an issue we are studying. There has been no decision made saying we are not going to sell ... We are carefully looking at the aerial defence needs of Taiwan," Raymond Burghardt told reporters in Taipei.
Burghardt, the Washington-based chairman of the American Institute in Taiwan (AIT), made the remarks after meeting President Ma Ying-jeou who renewed the island's request to purchase F16 C/D jets.
"It's a big decision because it's going to one of the most important arms systems they have requested, maybe the most significant one they have on the table at this moment," said Burghardt.
Taiwan applied to the US government to buy 66 F-16 fighters in early 2007, but observers say Washington has held up the deal for fear of angering Beijing.
The United States in January approved a 6.4 billion-dollar arms package to Taiwan, prompting a furious Beijing to halt military exchanges and security talks with Washington.
China opposes any arms sales to Taiwan, which it regards as part of its territory awaiting reunification, by force if necessary, even though the two sides have been split since the end of a civil war in 1949.
"Of course there will be a reaction from Beijing," Burghardt said, adding China has identified this as a "particularly serious issue."
The AIT has handled unofficial ties with Taiwan since Washington switched diplomatic recognition from Taipei to Beijing in 1979, although the United States has remained a leading arms supplier to the self-ruled island.
Taiwan's relations with China have warmed since Beijing-friendly Ma became president in 2008, but apprehension about the growing might of the mainland still lingers.