Decree 72 could also harm Vietnam’s IT sector by scaring off foreign firms, it is claimed.
America is "deeply concerned" over a new decree in Vietnam that will ban internet users from discussing current affairs.
The law was announced last week and is due to come into effect in September, and says that social media should only be used for exchanging personal information.
The US embassy based in Hanoi has said it is "deeply concerned" at the news.
Vietnam is a one-party communist state with a tight grip on the media, and has reportedly convicted at least 46 activists including bloggers for anti-state activity so far this year.
The law, called Decree 72, goes a step further by banning online material which opposes the government or is deemed to harm national security.
The US embassy released a statement on Tuesday reading: "We are deeply concerned by the decree’s provisions that appear to limit the types of information individuals can share via personal social media accounts and on websites.
"In addition, this decree will limit the development of Vietnam’s budding IT sector by hampering domestic innovation and deterring foreign investment.
"Fundamental freedoms apply online just as they do offline. We call on the Vietnamese government to respect the right to freedom of expression."
It added that the law is at odds with Vietnam’s obligations to the International Covenant on Civil and Political Rights, and the Universal Declaration of Human Rights.
The law also means all foreign ISPs would have to have a server in Vietnam.
Campaign groups including Reporters Without Borders and the Asia Internet Coalition, which represents Google and Facebook, have criticised the law.
The latter said: "In the long term, the Decree will stifle innovation and discourage businesses from operating in Vietnam, thereby hindering Vietnam’s goal to establish itself as an advanced competitive ICT nation."