The decree, known as Decree 72, says blogs and social websites should not be used to share news articles, but only personal information. The law also requires foreign internet companies to keep their local servers inside Vietnam.
The new law specifies that social networking sites such as Twitter and Facebook should only be used "to provide and exchange personal information".
It also prohibits the online publication of material that "opposes" the Vietnamese government or "harms national security".
Last month the US embassy in Hanoi said it was "deeply concerned by the decree's provisions", arguing that "fundamental freedoms apply online just as they do offline".