The loss to North Korea disheartened fans who had great expectations after Vietnam’s dream run in the previous edition of the tournament, finishing runners-up two years ago.
After two blank draws with UAE and Jordan, a full-points victory over North Korea was the only chance for Vietnam to advance to the quarterfinals, but their game did not prove solid enough.
Nguyen Tien Linh scored a much expected goal in the 16th minute, but Kang Kuk-chol equalized for North Korea 10 minutes later as custodian Bui Tien Dung fumbled in punching out a free kick.
While Dung stepped up his game for the rest of the match, he could not keep out Ri Chung-gyu's penalty in the 90th minute.
Vietnam launched several coordinated attacks until the end of the match, but inadequate finishing meant they could not find the back of the net.
The early exit from the AFC U23 Championship also means that Vietnam are out of contention to participate in the Tokyo Olympics later this year.