It intends to create a 160sq/km (61 sq/mile) area in the central province of Quang Nam for the animal, which is also known as the Asian unicorn.
The existence of the saola was confirmed only two decades ago and sightings are very rare.
Wildlife experts say the reserve could be vital to its survival.
“This decision has brought new hope for the survival of the saola, an animal that is on the brink of extinction in the world,” said Vu Ngoc Tram of conservation group WWF.
There are no saola in captivity and no scientist has ever reported seeing one in the wild. Photographs that do exist have been captured by local villagers and automatic cameras.
In August 2010, villagers across the border in the Laos province of Bolikhamxay caught an adult saola, but it died shortly afterwards.
Pham Thanh Lam, director of Quang Nam’s forest bureau, said the reserve area was home to an estimated 50-60 of the animals.
He said that education campaigns would be carried out to prevent villagers hunting them. Jobs would also be created for local people in the reserve, he said.
“For ethnic minority people, hunting is a way of earning their living,” he told the Associated Press news agency.
“They would not spare the saola, so it’s necessary to create conditions for them to earn their living to minimise hunting for wild animals including saola.”
The reserve is in the Annamite mountains along the Laos border.