The US sprayed 12 million gallons of the defoliant over jungles between 1961 and 1971 during the Vietnam war.
Vietnamese experts say more than three million people have suffered the effects of the herbicide, of which some 400,000 died.
The development is being hailed as one of the most significant in relations between Washington and Hanoi.
A ceremony to launch the programme was held at the Danang airport where the defoliant was stored before being sprayed over forests hiding fighters from the Viet Cong, guerrillas backed by the Communist government of North Vietnam.
US-Vietnam ties have blossomed since diplomatic relations were established 16 years ago and steps to resolve issues left over from the war have formed a cornerstone of progress, say correspondents.
"I think it's fair to say that dioxin contamination and Agent Orange was one of the single most neuralgic issues in the US-Vietnam relationship," said US charge d'affaires Virginia Palmer.
For years, Hanoi and Washington argued about questions of compensation for victims of the defoliant.
But now the US recognises that dioxin, found in Agent Orange, is a highly toxic substance.
"Studies suggest that this chemical may be related to a number of cancers and other health effects in humans", says the US Department of Veterans Affairs.
Five years ago the embassy began to shift the focus to cleaning up dioxin hot spots, clearing the path for swift progress on what had become the biggest remaining war-era issue.
The US Congress appropriated an initial $3m (Â£1.8m) in 2007 for the effort and the figure has since risen to $32m.

The aim of the new programme is to reduce the number of Manx women who develop cervical cancer.
The additional test would mean more focussed treatment for "higher risk" individuals.
A spokesman said abnormalities caused by HPV can easily be treated before becoming dangerous.
He added: "With the discovery that HPV causes the majority of cervical cancers and following research and trials over many years, it is now possible to screen for high risk HPV as part of the existing cervical screening programme.
The test for high risk HPV is done on the cervical screening sample, which means that women will not notice anything different when they have their regular cervical smear test.
All women in the Isle of Man between the ages of 25 and 49 are called for cervical screening every three years.
Those between 50 and 64 are called every five years.
Vietnam and the United States have taken the first step towards cleaning up Agent Orange contamination.
[NEXT_CONCEPT]
A test for the Human Papilloma Virus (HPV) is to be included within the Isle of Man's cervical cancer screening programme, says the health department.