In a ceremony at Parliament House in Canberra, Mr Albanese presented a group of veterans commemorative medallions and certificates to honour their service in Vietnam.
Veterans who served in the war and the families of ex-personnel can apply for the medallions.
About 60,000 Australians served in the Vietnam War, with more than 3000 wounded and 523 killed.
Mr Albanese praised Vietnam veterans for their advocacy.
"We honour you, we thank you and we are so sorry it took us so long as a nation to do so," he said on Wednesday.
"You deserve better. Let us begin here with this formal acknowledgement in the national parliament."
Upon returning home to Australia, many Vietnam veterans experienced hostility from the community, including being spat on and having paint thrown on them during parades.
During Australia's participation in the war, post office workers went on strike and refused to deliver mail to deployed personnel.
Vietnam veteran Colleen Thurgar was one of the first four army nurses posted to the 8 Field Ambulance unit in 1967.
The 79-year-old said it was wonderful for veterans to finally be recognised for their service.
"We couldn't walk the streets in our uniform," she said.
"It's good the government has done something."
Ms Thurgar said female veterans had long been sidelined and were often told they should move their medals to the right side, indicating they hadn't completed military service.
Veterans' Affairs Minister Matt Keogh said the war had been "contentious at home, and for some veterans their service was not recognised as it should have been".
Defence force chief General Angus Campbell attended the ceremony and spoke with the veterans afterwards.
