US Secretary of State John Kerry yesterday hailed the transformation of relations with Vietnam 20 years after ties were established, but warned Hanoi's poor rights record stood in the way of deeper bonds between the former wartime foes.

Kerry, on the last leg of a trip through the Middle East and Asia, said progress on rights issues was key to boosting the partnership between the two countries, which fought a bitter decades-long war that ended in 1975.

"We have seen some positive steps on human rights in Vietnam over the past year,' Kerry said after meeting Vietnam's Foreign Minister Pham Binh Minh, pointing to the release of several high-profile prisoners of conscience, some of whom now live in exile in the United States.

But he said there was "room for improvement", urging legal reforms to remove vaguely-worded provisions in the penal code that are frequently used to persecute domestic critics.

Minh responded that the communist country "respects and promotes" human rights, while it was willing to engage with the US to improve.

In a sign of warming US ties with Hanoi, last year Washington partially lifted a 40-year ban on arms sales to Vietnam.

The move came in the face of growing assertiveness by Beijing in the South China Sea where Hanoi is locked in a longstanding territorial dispute with China over island chains.

Yesterday, Minh asked the US to fully lift the embargo on lethal weapons sales, saying Vietnam "respected" its role in contributing to peace in the region.