This article examines factors and root causes of dilemma and environmental governance challenges in the Red River Delta of Vietnam. Since the Renovation (Doi Moi) period, there has been an accelerating growth of craft villages and industrial clusters in rural areas. While these processes contribute to creating jobs, increasing rural income, and assuaging rural–urban migration pressures, little attention is devoted to environmental effects they have caused at the village level. Drawing on case studies in
the Red River Delta and desk reviews, this study suggests that rural industrialization has witnessed rapid expansion of craft villages and intense market competition among them, leading to environmental pollution and resource depletion. Although the Vietnamese government has issued directives and environmental laws to regulate and control environmental pollution, the situations remain unabated. This study calls for sound environmental policies to sustain the operation of craft villages while ensuring the effective governance of rural industrialization.