The rig was operating within Vietnam's exclusive economic zone, about 200 kilometres from the coast, ministry spokesman Le Hai Binh said.
The move was “illegal and invalid” and the country “absolutely opposes it”, he said.
The statement late on Sunday came a day after the China Maritime Safety Administration posted a message on its website saying drilling rig HD981 would be operating in waters near the Paracel Islands from May 2 until August 15.
China already controls the Paracels, according to the research organisation International Crisis Group.
Chinese forces seized the then South Vietnam-occupied islands in January 1974.
Beijing claims nearly all of the sea, which contains key shipping lanes and is believed to be rich in oil and gas deposits.
Vietnam, Malaysia, the Philip-pines and Brunei have competing claims to different areas, as does Taiwan.