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.
Vietnam and the United States have taken the first step towards cleaning up Agent Orange contamination.