Sponge-related research in Taiwan has primarily focused on natural product exploration. This research has, however, been hampered by a lack of fundamental work on sponge taxonomy and ecology. In the present study, subtidal sponges were photo-recorded in situ and collected by scuba diving at a depth range of 2–20 m from 2009 to 2012 in 16 different sites surrounding the Penghu Archipelago, Taiwan. Sponge samples were identified to the lowest taxonomic level based on skeletal morphology and spicules. A total of 53 species belonging to 24 families and 10 orders were identified in this study. The number of sponge species per site ranged from 0 to 24. The most widely distributed sponge species was Callyspongia (Euplacella) cf. communis (Carter, 1881) followed by Haliclona (Gellius) cymaeformis (Esper, 1794), and Aaptos suberitoides (Brøndsted, 1934). At one location, Chipeiyu, no sponges were observed. Non-metric multidimensional scaling (NMDS) ordination revealed relatively low similarity among most sampling sites. Large- and small-scale hydrological and habitat features are probably responsible for compositional variation of sponge assemblages among groups of sampling sites. Our richness analyses suggest that many more sponge species remain to be discovered in the Penghu Archipelago.