Blogs or social media sites like Facebook and Twitter -- which have become hugely popular over the last few years in the heavily-censored country -- should only be used "to provide and exchange personal information", according to the decree.
The document, signed by Prime Minister Nguyen Tan Dung and made public late yesterday, stipulates that internet users should not use social networks to share or exchange information on current events.
Social media users will not be allowed "to quote general information... Information from newspapers, press agencies or other state-owned websites", Hoang Vinh Bao, head of the Department of Radio, TV and Electronic Information, said, according to a report on the state-run VNExpress news site.
The decree, which comes into force in September, also bans foreign Internet Service Providers from "providing information that is against Vietnam, undermining national security, social order and national unity... Or information distorting, slandering and defaming the prestige of organisations, honour and dignity of individuals".
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Deputy Minister of Information and Communications, Le Nam Thang, said the new rules aim to help internet users "find correct and clean information on the internet," the VietnamNet online newspaper reported.
Many citizens prefer to use social media and blogs to get their information rather than the staid official press.
But the authoritarian government has repeatedly attempted to stifle growing online debate in what rights groups say is an escalating crackdown on freedom of expression.
Online commentators reacted with fury to the decree.
"This decree clearly aims to muzzle the people," Nguyen Quang Vinh wrote on his well-read blog.
The authorities want "to turn us into robots", wrote popular Vietnamese Facebook user Nguyen Van Phuong.
At least three bloggers were also taken into custody in June alone, all accused of anti-state activity.