The Red Bull driver lapped the 3.340km Monte-Carlo street circuit in a time of one minute 13.556 seconds to go 0.441secs quicker than McLaren's Jenson Button.
Vettel's team-mate Mark Webber lines up third ahead of Ferrari's Fernando Alonso, with Mercedes GP's Michael Schumacher fifth.
Alonso's team-mate Felipe Massa starts sixth ahead of McLaren's Lewis Hamilton and Mercedes driver Nico Rosberg.
Williams driver Pastor Maldonado will start ninth, however the final driver to make it through to the top-10 shoot-out, Sauber's Sergio Perez, is a doubt for Sunday's race after suffering a heavy crash in the final session.
