The in form Dutchman, who recently won his first PDC major title at the World Grand Prix in Dublin, hit seven 180s and posted a fabulous 108.38 average in a brilliant match in Wolverhampton.
van Gerwen won seven out of the last eight legs to triumph 10-5 over Taylor to move into the last eight of the tournament for the first time.
“I’m so happy to win,” said ‘Mighty Mike’, who had won all three of his games in the group stage.
“To beat Phil when he plays like that is very hard and I had to play what was one of the best games of my life.
“This is a big moment for me but I have to be ready for the next game now and I hope to go on and win the tournament.”
Taylor took the opening leg but van Gerwen levelled with the aid of his first maximum.
‘The Power’ edged back in front before ‘Mighty Mike’ produced a lovely 82 checkout, hitting the bull and double 16.
The next three legs all went with the throw, with Taylor taking out 125 to move into a 4-3 lead.
van Gerwen then went on a mini power surge of his own, however, hitting three more 180s as he took the next three legs.
The ninth leg proved to pivotal, when Taylor missed the bull for a 167 checkout and ‘Mighty Mike’ stepped in for the first break of throw, finishing 91 to move ahead for the first time.
He then pinned tops to double his lead, before taking out a brilliant 130 finish on the bull against the throw.
The Dutch sensation took a fifth consecutive leg with another 91 checkout but the world number one pegged him back, despite van Gerwen hitting his seventh maximum.
‘Mighty Mike’ posted double 16 to move within a leg of victory, before sealing the match on tops.
Robert Thornton and Arron Monk were denied last eight spots though.
Thornton was edged out 10-8 by Scott Waites in a match where both players averaged over 102, while Monk suffered defeat at the hands of Dean Winstanley.
By Chris Murphy