Arjen Robben had fired the Dutch into an early lead, but a stunning volleyed equaliser from Tim Cahill and Mile Jedinak's penalty early in the second-half had put Autralia on course for their most famous ever victory at a World Cup.
Their joy was short-lived, though, as Robin Van Persie levelled before Maty Ryan let Memphis Depay's long-range effort creep into the bottom corner to make it two wins from two games for the Dutch in Group B.
"I just wanted the players to get the reward for the way they went about things today," said Australian coach Ange Postecoglou.
"I have put a lot of pressure on the players and the staff that we are going to be a certain type of team and take it to world class opposition, but it is one thing saying it and another thing doing it.
"They did that today but didn't get their reward. It's heartbreaking and massively disappointing."
The Dutch will be certain of a place in the next round should Spain fail to beat Chile later later on Wednesday while Australia are staring at almost certain elimination.
Australia will face champions Spain in their last match but will have to do without Cahill as he saw his second yellow card of the tournament, whilst Van Persie will miss his side's clash with Chile after also being booked.
Australia had never been beaten in three previous friendly meetings with the Netherlands, but they forced to come from behind when Robben galloped through the Australian half almost unchallenged before rifling home his third goal of the tournament.
The lead lasted barely a minute though as the Socceroos levelled in style when Cahill caught a deep cross flush on the volley to send the ball crashing in off the bar in a goal reminiscent of Marco Van Basten's legendary strike for the Dutch in the 1988 European Championships final.
Two great chances
Australia then went on to control the rest of the half and had two great chances to go in front.
Firstly Mark Bresciano blasted over when well-placed inside the area before Matthew Spiranovic failed to make to make a clean contact from close range as a free-kick fell at his feet.
Cahill was then booked for a rash challenge on Bruno Martins Indi that forced the Dutch centre-back off on a stretcher with Depay replacing the Feyenoord man.
Australia continued to press at the start of the second-half and had a goal ruled out within 60 seconds of the restart for a push by Matthew Leckie on Daley Blind.
Van Persie then saw his second yellow card of the tournament when he clashed with Spiranovic.
And things got even worse for the Dutch moments later when Daryl Janmaat was adjudged to have handled substitute Oliver Bozanic's cross and Jedinak stepped up to convert from the penalty spot to put Australia in front.
Again, though, the lead was short lived as poor defending from Jason Davidson allowed Van Persie to spring the offside trap and thunder his third goal of the tournament high into the net.
The game then turned in 60 seconds midway through the second-half as Leckie's chested effort from Tommy Oar's cross was smothered on the line by Jasper Cillessen and at the other end Ryan let Depay's long-range effort slip through his grasp to put the Netherlands back in front.
Ryan somewhat redeemed himself with a great save from Nigel De Jong 16 minutes from time, but it had no impact on the outcome as, despite another brave display, Australia slipped to their second defeat in the group.