This research examines the relationship between urbanization and provincial per-capita income growth in Vietnam from 2018 to 2023. Utilizing panel data for 63 provinces across 6 years, the study applies a two-way fixed effects model and its extended variations, while also evaluating the impact of the COVID-19 pandemic on the urbanization–growth nexus. The main findings show a complex and lagged relationship. First, the baseline fixed effects model shows significant negative association between urbanization rate and provincial per capita income growth. Second, the COVID-19 shock had a heterogeneous impact. The interaction term between urbanization and the COVID dummy is negative, implying that more urbanized provinces were disproportionately affected from 2020–2021. The COVID dummy itself also shows a negative short-run effect, although with smaller effect. Third, dynamic analyses reveal that the adverse effects of urbanization arise both within the year and with a delay. This pattern suggests that adjustment costs from urbanization, such as congestion and labor mismatches, may take time to fully materialize. These findings imply two main policy directions. First, instead of pursuing rapid urban expansion, policymakers should prioritize managing adjustment costs, such as congestion, infrastructure bottlenecks, and institutional coordination, and strengthen resilience to shocks. Second, since the impact of urbanization materializes with a lag, project evaluation should adopt multi-year horizons rather than relying solely on immediate growth responses. At the same time, the results should be interpreted with caution, as the study period coincides with the COVID-19 pandemic, making it difficult to fully disentangle structural effects from temporary shocks.