Abstract Background Economic reforms and trade liberalisation in Vietnam have transformed the food environment, influencing dietary patterns and malnutrition status. The present study focuses on the relationship between food environments (proximity and density of food outlets) and malnutrition (underweight, overweight, obesity) through diet quality in adult populations across urban, periurban and rural areas of Vietnam. Methods We evaluated food environment by geospatial mapping of food outlets through a transect walk across the “food ecosystem” from rural to urban areas. Diet quality was assessed using the Diet Quality Index – Vietnamese (DQI‐V) comprising Variety, Adequacy, Moderation and Balance components. Malnutrition status was determined using body mass index. We performed a mediation analysis utilising mixed effect models to control for neighbourhood clustering effects. Confounders included age, education, income and nutrition knowledge score. Results Analysis of data from 595 adult participants (mean ± SD age: 31.2 ± 6.4 years; 50% female) found that longer distance to the nearest food outlet was associated with higher overall DQI‐V (β = 2.0; 95% confidence interval = 0.2–3.8; p = 0.036) and the Moderation component (β = 2.6; 95% confidence interval = 1.2–4.0; p = 0.001). Outlet density shows a negative association with the odds of underweight among women (odds ratio = 0.62; 95% confidence interval = 0.37–0.96). However, we did not observe statistically significant relationships between diet quality and malnutrition. Education and nutrition knowledge scores were positively associated with diet diversity, while income was negatively associated with diet moderation. Conclusions The findings of the present study have important implications for nutrition and dietetics practice in Vietnam and globally. It emphasises the need to consider various dimensions of sustainable diets, including economic, health and socio‐cultural/political factors. Longer distances to food outlets are associated with higher diet quality, whereas lower food outlet density increases the odds of underweight among women. This poses challenges in balancing modernisation and its adverse effects on sustainable food systems. Socio‐economic status consistently correlated with diet quality and malnutrition, necessitating further research to promote healthy diets across socio‐economic strata.