Vettel's best lap time of 1 minute, 13.556 seconds gave Red Bull its sixth straight pole, ahead of McLaren's Jenson Button and Vettel's teammate Mark Webber.
“If you'd asked me before qualifying if I would have taken third, I probably would have,” Webber said.
Webber took pole at last week's Spanish Grand Prix, the 23-year-old Vettel took the previous four poles and already leads McLaren's Lewis Hamilton overall by 41 points as he bids to win in Monaco for the first time.
“I had to wait a long time to get the pole, but I'm very pleased,” said Vettel, F1's youngest ever champion.
It was a disappointing session for Ferrari's Fernando Alonso, who was quickest in the final practice on Saturday morning, but dropped to fourth in qualifying.
Mexican driver Sergio Perez crashed his Sauber exiting the tunnel near the end of qualifying.
Perez became the third driver to crash on Saturday, racing out of the tunnel and skidding across the track.
“It's difficult to keep the focus and it's difficult to keep the concentration when you don't know what's going on,” Vettel said. “We all wish him the best.” Perez's crash severely hampered Hamilton, as he had yet to set a lapped time and the heat went out of his tires as he waited nearly 40 minutes for qualifying to resume. The 2008 F1 champion will start Sunday's race down in seventh spot, a disappointment for the English driver, who was fastest in both the opening two qualifying sessions.
With Perez racing in the third session for the first time this season, the Mexican lost control of his car as he was about to come out of the tunnel. The front slid over to the right and slammed into the tunnel barrier, spinning the car round and sending it into a tire wall on the circuit.
Button had a similar tunnel crash in 2003.
“I know how much it hurts, so hopefully he'll be okay,” Button said.
A medical crew rushed to Perez's car, and a giant blanket was immediately draped over it. After a few minutes the battered car was lifted off the track after Perez had been taken away for treatment. His injuries were not immediately known.
Sauber team official Hanspeter Brack told reporters: “Sergio was conscious and he has been talking. He is now being brought to the hospital and we will have to wait for further information.” Alonso, meanwhile, had the fastest time in the third and final practice session in the morning, following on from his quickest time in Thursday's second practice and raising hopes Ferrari could get its first win of the season in Monaco.
Ferrari has been lagging behind Red Bull, but this weekend was the first time it has been faster in practice.
Alonso, last year's F1 runner-up, already trails Vettel by 67 points and now needs a good performance from the second row on Sunday to put any kind of pressure on Vettel.
Alonso's best place this season was third in Turkey.
In a disappointing afternoon for Renault, both Vitaly Petrov and Nick Heidfeld missed out on making the third qualifying stint, suggesting a problem with downforce as their cars were bumping around the track.
Practice was interrupted twice in the morning as drivers raced around the sinewy, barrier-lined circuit under perfect blue skies. Mercedes driver Nico Rosberg and Hispania's Vitantonio Liuzzi were both unharmed after crashes.
Rosberg clambered out and walked away after ploughing into a crash barrier after flying out of the tunnel and swerving off to the right - a chilling glimpse of what would happen to Perez just hours later.
A second red flag then went up when Liuzzi crashed sideways into the barriers at the Sainte Devolte turn. The Italian's mangled Hispania car was airlifted away and he did not start qualifying.