Trevor Hill, the school's head of science, has designed a scanning radio receiver to observe and record radio emissions from the Sun.
As well as being studied by the school the data will help scientists to understand the Sun and its influence on the weather.
UK astronaut Helen Sharman, one of the judges, said: "We were overwhelmed by the creativity and originality of the ideas submitted. It is clear from the quality of the entries that space exploration remains one of the most exciting areas of science for British pupils today."
Runner-up in the competition organised by the Millennium Satellite Centre was Birkdale school, Sheffield.
Mr Hill said sixth-formers would visit the University of Surrey where the scanner was being built to see its progress. Studying the data sent back from space would be the school project in 2001.
Taunton School has a long record in the field of radio astronomy and has featured on the BBC's Sky At Night programme. It made national news when pupils observed radio waves from the Shoemaker-Levy Nine Comet in 1994.
Mr Hill added: "Radio waves from space create an awareness of the universe as well as encouraging pupils to be involved in engineering projects and scientific research. It gives pupils an appreciation that this work is interesting and important and that is what careers in science and engineering can offer."
Next year's sixth form arepreparing to study an eclipse of the Sun in August 1999.