The voting suggests Turkish Cypriots, frustrated with decades of international isolation, have backed his pro-EU call.
With nearly three-quarters of the ballot boxes counted, Talat was taking 55% of the vote, while his main rival, Dervis Eroglu, was polling just 22%.
The voting is to replace Rauf Denktash, a hardliner who for decades has opposed efforts to unite the war-divided island. Eroglu is largely regarded as favoring Denktash's stance.
Talat wants to start new reunification talks with Greek Cypriots so the Turkish-occupied north will not be excluded from the benefits of the island's membership of the European Union.
"Turkish Cypriot people are voting with their free will," Talat said as he cast his ballot in the divided Cypriot capital of Nicosia. "This is for peace, for a solution of the Cyprus problem and Cyprus' entry into EU as a whole."
A total of nine candidates are competing for the president's post.
Talat wants the north to benefit
from joining the EU
"I voted for Talat because maybe he can help bring a solution," 53-year-old Mehmet Turker said after casting his vote on Sunday.
"How long can this society continue to live like this?" Tassos Papadopoulos, the president of the internationally recognised government in the Greek Cypriot south, asked on Sunday.
"I hope the vote in the occupied region will result in a leadership that will show a sincere desire for the resumption of negotiations for the reunification of our country."
Papadopoulos spoke before flying to the Czech Republic as part of a tour of EU capitals to rally support for changes in a UN reunification plan.
A majority of Turkish Cypriots had backed the plan in a referendum last year, but it was defeated when Greek Cypriots voted it down. Talat had supported the plan, but both Denktash and Papadopoulos had opposed it.
Turkish Cypriots' support of the plan was a major letdown for Denktash, the most prominent politician in the north of the island since the Turkish invasion of 1974, who has long demanded international recognition for his breakaway state.
Denktash said he would continue
to lobby against reunification
On Sunday, Denktash warned the new leadership not to give up on Turkish Cypriot sovereignty.
"The person elected will take office and will have the duty of protecting the republic, its independence, and the sovereignty of its people. It is our duty to elect a person dedicated to these principles," Denktash said.
Denktash still present
Even though he is leaving active politics, Denktash, 81, still has significant support on the island and has said he plans to keep lobbying against reunification.
Talat, meanwhile, urged Papadopoulos to accept an invitation by UN Secretary-General Kofi Annan to restart talks to solve the Cyprus problem, the Anatolia news agency reported.
The island has been split into Turkish and Greek Cypriot sectors since the Turkish invasion, sparked by a failed coup by supporters of union with Greece.
Last year, the island joined the European Union, but EU benefits only apply to the south.
Talat's pro-EU campaign has proven popular with many Turkish Cypriots, whose income is just a fraction of Greek Cypriots' and whose economy is heavily dependent on support from Turkey.
Much support for Eroglu and others running against Talat comes from thousands of settlers from mainland Turkey who are concerned about their future on the island and uncertainty if thousands of Turkish troops there leave.
"Since the president (Denktash) did not run, I voted for one close to him," said Hasibe Gomlek, 45, originally from Osmaniye, southern Turkey. Eroglu "will protect the rights of those from Turkey," he said.