The project, known as SAS Hanoi Royal, is a joint venture between Hanoi Tourism Company and SIH Investment Limited of Singapore, the government said on its website.
French-based Accor would manage the completed hotel under its Novotel brand, an Accor spokesman said.
Prime Minister Nguyen Tan Dung ordered a “suspension” of construction while an alternate site is sought, the government said.
Dung asked relevant authorities “to choose a different location and recommend that to the investor”, the government said, adding that public opinion, including that of architects and planning experts, said building the hotel in Thong Nhat park would seriously affect the city’s environment.
Sealed off behind a high green fence in one corner of park, the site has been churned up and metal rods inserted into the ground but there was no evidence of active construction when AFP visited.
Plans called for a five-storey, four-star hotel with 376 rooms, the government said.
Evan Lewis, Accor’s regional vice-president of communications, said he received media reports of the prime minister’s decision but had not been officially informed, and so declined to comment.
Thong Nhat, once known as Lenin Park, contains neatly-laid flower beds, tree-lined pathways, children’s rides and a lake. The park is a popular spot for exercising in the heart of an increasingly congested capital.