Tonnes of dead fish, including rare species which live far offshore and in the deep, have been washing up on beaches along the country's central coast, causing public alarm and hitting local fishermen.
State media coverage has focused on a 1.5 kilometre (one mile) waste water pipeline which runs directly from Formosa's multi-billion dollar steel plant in Ha Tinh into the ocean.
The Taiwanese company this week said local communities needed to consider whether they valued marine life or foreign investment in the area more.
"You cannot have both," Chou Chun Fan, Formosa Ha Tinh's external relations manager told state-run VTC14 television channel, speaking in Vietnamese.
"(You) need to choose whether to catch fish and shrimp or to build a state-of-the-art steel mill," he said, according to a video of the interview posted online.
Although the pipeline itself is legal, Formosa is only permitted to discharge treated waste water into the ocean, according to a media report.
"The problem is what and how (Formosa) discharged," from the waste-water pipe, deputy environment minister Vo Tuan Nhan said, according to the report.
The report also said that Formosa had imported some 300 tonnes of toxic chemicals to clean the waste-water pipeline, a shipment the Vietnam Environment Administration said it was not informed of.
The report did not say whether the chemicals had been used.
Local fishermen are claiming that before the company arrived in the area, fish and shrimp were plentiful, but since it began work, fish stocks have plummeted.
Hanoi has dispatched teams of environmental experts to the area to investigate the dead fish.
Vietnam's central provinces are heavily dependent on seafood, including farmed shrimp, catfish and wild-caught tuna.
Last year, the country earned US$6.6 billion from seafood exports.
Top politicians have said they will consider requesting international help to determine exactly what is killing the fish, and have vowed to bring anyone responsible for the disaster to justice.
"There will be no exceptions," Deputy Prime Minister Trinh Dinh Dung said, according to a statement posted on the government's website.