A formal ceremony marking the start of full construction at Xayaburi would be held on Wednesday, the government said.
Countries downstream from the $3.5bn (£2.2bn) dam fear it will affect fish stocks and the livelihoods of millions.
The announcement came as leaders from Asia and Europe began a two-day meeting in the Laos capital, Vientiane.
Landlocked Laos is one of South-east Asia‘s poorest countries and its strategy for development is based on generating electricity from its rivers and selling the power to its neighbours, says the BBC’s Jonah Fisher in Bangkok.
Xayaburi is being built by a Thai company with Thai money – and almost all of the electricity has been pre-sold to Thailand, our correspondent says.
Countries such as Cambodia and Vietnam point to a report last year that said the project should be delayed while more research was done on the dam’s environmental impact. Up to now, Laos had promised not to press ahead while those concerns remained.
Bold, brave or perhaps a good way to bury the news? The Laos government chose to announce the dam would go ahead on the day it hosted one of the biggest summits in its history.
It won’t be hard to get immediate feedback. The prime ministers of two of the dam’s biggest opponents – Cambodia and Vietnam – are in Vientiane for this week’s Asia-Europe Meeting.
The problem both men have is that Laos has followed the letter, if not the spirit, of the 1995 Mekong Agreement. Under its terms, the countries that share the Mekong agree to prior consultations on the possible cross-border impact of any development on the river before deciding to proceed. Laos believes it has just done that.
Cambodia and Vietnam expressed concerns about the dam’s impact on fish migration and the flow of sediment downstream. So the Laos authorities brought in their own contractors and now say the problems have been solved.
Critics of the dam say many of the modifications to it are untested and the decision to proceed amounts to a huge experiment on one of the world’s great rivers.
Four dams already exist in the narrow gorges of the Upper Mekong in China but until now there have been none on the slower-moving lower reaches of the river, our correspondent says.
Laos deputy energy minister Viraphonh Virawong said work on the Xayaburi dam itself would begin this week, and hoped it would be the first of many.
“I am very confident that we will not have any adverse impacts on the Mekong river,” Mr Viraphonh told the BBC. “But any development will have changes. We have to balance between the benefits and the costs.”
Mr Viraphonh said he believed that concerns about fish migration and sediment flow had been addressed thanks to modifications to the original dam design costing more than $100m.
Sediment will be allowed out of the bottom of the dam periodically through a flap and lifts, and ladders will help the fish travel upstream.
“We can sense that Vietnam and Cambodia now understand how we have addressed their concerns. We did address this properly with openness and put all our engineers at their disposal. We are convinced we are developing a very good dam,” Mr Viraphonh said.
Laos keeps saying that it has addressed the concerns of neighbouring countries, but this is misleading”
There was no immediate reaction from Cambodia or Vietnam, whose prime ministers are in Laos for this week’s Asia-Europe summit.
Under the terms of a longstanding agreement on the Mekong, there must be consultation between countries on any development on the river.
The US State Department issued a statement expressing concern, despite its recognition of the “important role” dams play in economic growth.
“The extent and severity of impacts from the Xayaburi dam on an ecosystem that provides food security and livelihoods for millions are still unknown,” it said.
Environmental campaign group International Rivers said Laos’ promise to cooperate with neighbouring countries had never been genuine.
“The project has always continued on schedule and was never actually delayed,” the group’s Southeast Asia policy coordinator, Kirk Herbertson, told the BBC. “Construction on the project is continuing now because the wet season has ended, not because the environmental studies are completed.”
He said experts agreed it was doubtful that fish passages could work on the Mekong and “on the sediments issue, Laos is also jumping to conclusions”.
“Laos is playing roulette with the Mekong, and trying to pass its studies off as legitimate science.”