Hitler's photograph featured prominently in full-page newspaper advertisements paid for by the opposition Kuomintang (KMT) which called on voters to end Chen's "dictatorship".
Taiwan's small Jewish community condemned the advertisement, demanded it be withdrawn and called on the KMT to make a public apology.
Chen, from the Democratic Progressive Party (DPP), is running for a second four-year term and has caught up with KMT chairman Lien Chan in most opinion polls ahead of the 20 March vote after lagging well behind for months.
The KMT attack follows a newspaper advertisement placed by the Chen camp which pictures him alongside four world leaders, including Winston Churchill and John F Kennedy, under the headline: "Only the real leaders know what peace means."
In response, the KMT's advert in two mass-circulation Chinese-language daily newspapers says: "A-Bian (Chen's nickname) puts his pictures by those of Churchill and Roosevelt."
"But in fact he is becoming more like Hitler. The DPP is also becoming more authoritarian under A-Bian," it says.
"Only a dictator equals himself as his country. A-Bian thinks he is a symbol of democracy but he is hostile to those who oppose him, treating them like enemies."
"I find it incredibly offensive. I think most people will find it outrageous"
The advert is headlined: "Change President, End A-Bian's dictatorship". Its grainy photograph of Hitler has Italian Fascist leader Benito Mussolini lurking in the background.
DPP legislator Hsiao Bi-khim said: "I find it incredibly offensive. I think most people will find it outrageous."
"To simplify the atrocities that Hitler has committed for the KMT's own electoral purposes and equate it with the fight for democracy is a total distortion of history."
Chou Shou-tsun, a KMT spokesman, on Friday defended the advertisement. "We compare A-Bian with Hitler since we are trying to stress the dictator's nature in A-Bian."
The KMT advertisement was designed to rally support for a series of anti-Chen protests on Saturday, a week before polling.
Taiwan's fraught relations with China have featured highly in the bitterly fought election campaign with Chen calling a referendum for 20 March alongside the presidential poll to ask voters to back peace talks and strengthen the island's military defences.