Lao Prime Minister Thoongsing Thammavong told his Vietnamese counterpart Nguyen Tan Dung last Saturday that construction on the Xayaburi dam would halt until more environmental impact assessments were completed.
Hanoi has been seeking a 10-year deferment of the scheme, which it said would have negative impacts on fisheries and farming further down the river.
The announcement came on the sidelines of the 18th Asean Summit in Jakarta, Indonesia, despite Lao officials saying on April 20 that it intended to proceed with the project.
Construction of the 1,260-megawatt dam has drawn significant criticism from conservation groups and other Asean countries, namely Cambodia and Vietnam.
PM Dung thanked the Lao group and government for the decision, which he said reflected deep consideration of Vietnam’s position.
At a regional meeting last month, Vietnam, which has close political ties with Laos, called for hydro-power projects on the mainstream Mekong to be deferred for at least a decade.
Workers had already begun building roads to the site in northern Laos.
Xayaburi is the first of 11 such projects proposed for the mainstream lower Mekong.
Environmentalists have also warned that damming the lower Mekong would trap vital nutrients, increase algae growth and prevent dozens of species of migratory fish swimming upstream to spawning grounds.
More than 60 million people in the lower Mekong basin depend on the river system for food, transport and economic activity, but Laos is one of the poorest countries in the world and sees hydropower as being vital to its future.
Under a deal signed by Cambodia, Laos, Thailand and Vietnam in 1995 to create the Mekong River Commission, the four countries agreed to consult one another whenever one of them planned a major dam project.
The four countries met in mid April in the Lao capital of Vientiane to debate whether the dam should proceed. The meeting failed to come to a common conclusion, so the four countries had to agree to put the problem up to the ministerial level.