The agreement was signed in Ha Noi on Monday by Joe Thwaites, Australian Ambassador and Nguyen Kim Hieu, Chairman of Quang Ngai People's Committee.
The project is the second-largest Australian aid project in Quang Ngai under the Viet Nam-Australia development programme.
Between 1996 and 2000, natural disasters killed 325 people, destroyed 5,500 houses, damaged 207,000 more and destroyed 90 fishing ships, causing property losses estimated at 1,075 billion VND.
The project has four main parts and will be implemented within 33 months in the basin of Tra Bong and Tra Khuc rivers. Its aims are to mitigate losses in lives and property caused by natural disasters; raise community awareness of prevention of natural disasters and boost socio-economic development of people living in storm- and flood-prone areas.