The 30-year-old four-time champion clocked a best lap of one minute 16.276 seconds to secure his third pole at the Hungaroring circuit and the 48th of his career.
His success gives him a perfect opportunity to make the most of the prime starting position and increase his one point lead over Lewis Hamilton in the standings.
“Yes, yes, grazie tuti (thanks everyone),” screamed german Vettel on his slowdown lap. “The car has been incredible today and I love this track. Front row for us is incredible.
“We’re working hard. It is just great. Obviously, the last race wasn’t great for us, but we are here now and I am happy where we are as a team.”
His Ferrari team-mate Kimi Raikkonen was second fastest and will start alongside Vettel at the front of the grid ahead of the two Mercedes led by Valtteri Bottas, who was third, and three-time champion Briton Hamilton.
Hamilton said he was not surprised by Ferrari’s overnight leap in performance.
“They were always going to be quick here and I was reasonably satisfied with our performance. I thought we did quite well, except in Q3, for me,” he said. “But you can’t overtake here and it will be a train unless we can do something on the strategy.”
Dutchman Max Verstappen was fifth for Red Bull ahead of his Australian team-mate Daniel Ricciardo, with German Nico Hulkenberg seventh for Renault and two-time champion Spaniard Fernando Alonso eighth for McLaren-Honda on his 36th birthday.
– Tough return –
On a hot day at the Hungaroring, with an air temperature of 28 degrees and a track temperature of 57, the session began with a fiercely-competitive opening section in which Briton Paul di Resta, Williams’s reserve driver, made his first appearance at a Grand Prix since 2013 as replacement for the unwell Brazilian Felipe Massa.
It was a tough return for the Scot and, despite a valiant effort, he was eliminated in 19th place along with Dane Kevin Magnussen of Haas, his Williams team-mate Lance Stroll and the two Saubers of German Pascal Wahrlein and Swede Marcus Ericsson.
Vettel topped the times, but the chasing pack, led by Verstappen, were closer at that stage than in the final practice, with Raikkonen third ahead of Hamilton.
Vettel, Hamilton and Bottas were the first out for Q2, the Englishman reporting “there’s a bit of vibration on these tyres” as he rejoined the fray in pursuit of a place in the top 10 shootout.
The German maintained his narrow advantage after the first flying runs ahead of Verstappen and Hamilton, who then responded with a new track record lap of 1:16.693 to go top as Vettel, Verstappen and Raikkonen stayed in the pits.
In a final flurry of Q2 action, Spaniard Carlos Sainz squeezed through in 10th for Toro Rosso, pushing Briton Jolyon Palmer of Renault out of the final session.
On the opening Q3 laps, Hamilton went off at Turn Four and chose to abort the lap, pulling into the pits. Bottas clocked 1:16.631 and then Vettel raised the record bar again to 1:16.276.
Surprisingly, given his earlier grumbles about the tyres and his ‘off’ in Q2, Hamilton was soon out for his final run.
“Big vibration on these tyres,” he said, again, as he launched his first flying lap.
But it was in vain as Vettel took pole from Raikkonen, who produced a scorching final lap to snatch second from his Finnish compatriot Bottas.