If the proposal goes through, prostitution, alongside gambling, will be allowed in three special economic zones in the northern province of Quang Ninh, the central province of Khanh Hoa and the southern resort island of Phu Quoc.
Prostitution is already legal in some 70 countries worldwide and a large body of evidence suggests banning sex work has failed to deter it and actually increases the risks of human trafficking and sexually transmitted diseases.
While the global debate is leaning towards legalization, Vietnam is still a largely conservative country.
Even though Vietnam's attitude is changing - sex workers are no longer sent to re-education camps - prostitution, alongside gambling, are still largely considered social evils as dictated by Confucian social mores.
Tran Chi Dung, the director of the tourism department in Kien Giang Province, which is home to Phu Quoc Island, said the proposal is a "sensitive matter".
The debate should also take into account Vietnam's tourism strategy, which aims to turn the sector into a major contributor to GDP.
At the same time, Vietnam wants tourism development to go hand in hand with preservation of cultural values and social stability.