Deputy PM Numan Kurtulmus said the Dutch ambassador would be barred from returning to Ankara, and high-level political discussions suspended.
Turkish attempts to hold rallies in Germany, Austria, Switzerland and the Netherlands have been blocked.
President Recep Tayyip Erdogan accused the Dutch and Germans of Nazism.
The BBC's Mark Lowen in Istanbul says Turkey and the Netherlands, two Nato allies, are now locked in an unprecedented diplomatic crisis.
Meanwhile, German Chancellor Angela Merkel has offered the Netherlands her "full support and solidarity".
On Monday, the Dutch foreign ministry issued a new travel warning, urging its citizens in Turkey to take care and noting the new "diplomatic tensions".
The row comes just two days before a in the Netherlands dominated by concerns about immigration and Islamic radicalism.
Dutch Prime Minister Mark Rutte cited security concerns ahead of the election as a reason for blocking the Turkish rallies.
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