The government has ordered a massive culling campaign just ahead of the country's biggest festival.
Earlier this week, provincial officials had said a fast-spreading disease in the country's south was chicken cholera.
The agriculture ministry on Friday dismissed this, saying the preliminary findings were wrong.
"We have identified the disease as the dangerous bird flu which was found in Vietnam for the first time," Hoang Van Nam of the ministry-run veterinary department said.
Further tests would be done abroad to verify the type of bird flu and to determine if it is a threat to humans.
In 1997 and 1998, the H5N1 variant of avian influenza swept through Hong Kong's poultry farms, killing six people.
"The bird flu is a combination of sub-types under H and N and so far we have been able to identify only H5," Nam said. There are 15 sub-types under H and nine under the N categories.
Meanwhile, Deputy Prime Minister Nguyen Tan Dung has ordered local authorities to destroy all chickens suspected of carrying the virus and said farms where sick birds were found would be quarantined.
Chicken is widely consumed in Vietnam during Tet, the new year celebrations that lasts from 21 to 27 January.
Veterinarians have said that around 500,000 chickens had been killed in the two southern provinces of Long An and Tien Giang.
Foreign help sought
Bird flu has also spread to the country's financial capital, Ho Chi Minh City, where some consumers have already taken chicken off the menu.
Dung has asked the agriculture ministry to seek foreign help to identify the sub-type of the virus and to find a cure.
Checkpoints have been set up to stop farmers dumping infected chickens at southern markets.
The country had 254 million livestock, including chickens, at the end of 2003.
Bird flu has emerged in other countries recently, with South Korea reporting several cases last month.
Thailand culled tens of thousands of chickens since late November to stop the spread of a virulent strain of cholera.