We don't know, because neither the film nor the novel ever mentions Vito having a reaction, or even being told. He was probably too sick to be told, or to react if told. We have to assume that Don Tomassino, as Michael's protector, communicated Michael's intentions, either to Vito or Sonny, but we never hear of a reaction from them.
Vito's reaction to Kay is obscure, too. In a deleted scene from GF, Vito says to Michael, after the wedding: "Did your American girlfriend get home alright?" He rolls his eyes as he says "American girlfriend," a clear sign of disapproval. And the only time we see Vito anywhere near Kay in the entire film is in the family photo that Michael drags her into at Connie's wedding.
The hint that Vito disapproved of Kay, per the above, makes me believe that he probably approved of Apollonia, a real Sicilian gal from a family that was vouched for by his ally, Don Tomassino. After Apollonia was killed, Vito probaby softened his attitude toward Kay, out of sympathy to Michael. He might even have believed that her impeccable WASP background would provide Michael with a modicum of respectability that he desperately needed, since he was now Don Corleone, and never going to be Senator Corleone or Governor Corleone.