Dao Dinh Binh, the transport minister, stood down on Tuesday when, Nguyen Viet Tien, his deputy, was arrested on suspicion of involvement in a major embezzlement scam.
The scam saw the ministry's Project Management Unit (PMU) 18 loot millions of dollars, including foreign investment, that was intended for infrastructure projects.
Some of the cash was reportedly spent betting on European football matches.
During the last six years, PMU 18 has received around $80 million for about 1,000 different projects from the World Bank, according to Klaus Rohland, the bank's Vietnam director.
It was unclear how much of the theft involved foreign funds and how much local money.
"This is something that we all expect the (government) investigation to identify," Rohland told AFP.
Binh, 61, a railway design engineer and former head of the state railway, has not been accused of any offence.
Nguyen Tan Dung, the deputy prime minister, is taking over at the ministry, the government said.
Vietnam's leaders are publicly cracking down on endemic official corruption ahead of the ruling communist party's five-yearly congress from 18 to 25 April that may see a major cabinet reshuffle.
Ordinary Vietnamese are angry that
money has been misspent
Binh has asked to be left out of the congress.
Transport ministry officials have been accused of skimming money for years off public construction projects and taking kickbacks from lucrative state contracts, using some of the funds to buy property or to bet on top English and Spanish football matches.
Bui Tien Dung, the department's former director general, and several other officials were arrested in January.
The four-month long investigation into the scandal and the government agency responsible for building roads and bridges came to a head on Tuesday evening when police arrested and indicted deputy minister Nguyen Viet Tien at his home in Hanoi.
Watched by hundreds of onlookers and journalists, police searched the official's house and charged him with breaking the law on economic management and for lax responsibility.
Public interest and criticism of the corruption case has been high.
Ordinary Vietnamese, whose average per capita annual income is $640, were offended when Dung confessed in January to betting $7 million on football matches instead of spending it on much-needed roads and bridges.
Anti-corruption campaigns are not unusual in Vietnam, especially on the eve of the Congress; but it was rare for a minister to take responsibility, political analysts said.