Mac Hong Quan, Vo Huy Toan and substitute Nguyen Van Toan pitched in with a goal each.
Vietnam have grabbled six points from two wins, having beaten Brunei 6-0 in the group's curtain-raiser.
Yesterday's convincing win gives Vietnam and an advantage in the group, which includes Thailand, Laos, Brunei, Malaysia and East Timor.
Vietnam's U23 squad began their second game with an attacking style, but it was Malaysia who got the first shot at the goal in just six minutes. Defender Salamat's free kick found Vietnamese goalkeeper Nguyen Minh Long well positioned to collect it.
Vo Huy Toan netted the ball in the 12 minute, but was adjudged offside.
Phuong set up a clear chance for Vietnam in the 14 when he was illegally tackled by a Malaysian defender in the penalty box.
Quan made no mistake from the spot to open the score for Vietnam.
Malaysia launched counter-attacks to try and tie the game, but they failed to penetrate a solid defence mounted by Vietnam.
A goal from Malaysia in the 37th minute was also called off-side.
In the 44th minute, Malaysia striker Abu Hassan Saari pouched the ball from a Vietnamese defender to face the goal, but his shot was not good enough to beat Long.
During injury time in the first half, Van Ngoc combined well with Phuong in a rapid counter-attack to help Vietnam leave the first half with a 2-0 lead.
Just two minutes from the break, Vietnam were awarded a penalty kick after Phuong was tackled by a Malaysian defender in the 18-yard area.
Vo Huy Toan made it 3-0 from the spot.
For his brace, Phuong scored the best goal of the match, curving a 25m free kick to the high corner of Malaysia's net past leaping custodian Mohd Farhar.
Substitute Syahrul Azuwari Ibrahim pulled back a goal for Malaysia in the 78th minute, but in the very next minute,
Vietnamese substitute Nguyen Van Toan completed a convincing win for Vietnam, evading an offside trap to lob the ball to the net in the 79th minute.