"With PVI, we feel confident that we have the right partner to become a market leader in Vietnam," Sun Life president and chief executive Dean Connor said in a statement.
PVI is an investment and insurance company with subsidiaries focused on general insurance, reinsurance, life insurance and other financial services.
Sun Life employs about 16,000 people, including 7,000 in Canada, and has insurance, wealth management and mutual fund operations around the world.
Vietnam will be added to the Asian countries where Sun Life has a presence, including the Philippines, Indonesia, India, Mainland China and Hong Kong.
Under the agreement, PVI will own 51 per cent of PVI Sun Life, while Toronto-based Sun Life will own the remaining 49 per cent.
"Vietnam's life insurance market has great potential and through PVI Sun Life we will be able to provide new products that are unique in the Vietnamese marketplace," PVI chairman Nguyen Anh Tuan said.
The joint venture is subject to regulatory approval in both Canada and Vietnam and is expected to start operations before the end of the year.