Put into bat, the Netherlands scored a modest 133 for 5 in their allotted 20 overs with Wesley Barresi top-scoring with 48 and then their bowlers wreaked havoc to bundle England out for just 88 in 17.4 overs at Zahur Ahmed Chowdhury Stadium.
Logan van Beek (3/9) and Mudassar Bukhari (3/12) were the main tormentors of England batsmen while Timm van der Gugten and captain Peter Borren chipped in with a wicket apiece.
This was England's second defeat at the hands of minnows Netherlands in World Twenty20. The Netherlands had beaten England in the 2009 edition at Lord's.
With today's result, England and the Netherlands both already knocked out of the tournament before the Group 1 match -- ended on identical two points with a win each from four matches.
Chasing 134 for a victory, England kept losing wickets at regular intervals with only three batsmen -- Ravi Bopara (18), Chris Jordan (14) and opener Alex Hales (12) -- reaching the double-digit mark.
None of the England batsmen could show stomach for fight as the Netherlands excelled in all departments of the game.
The English seemed clueless against the Netherlands bowlers and their highest partnership in the run chase was the 22 between Bopara and Jordan for the seventh wicket.
Bukhari got the first breakthrough when he bowled in-form Hales and he then added Michael Lumb's wicket to his kitty to leave England struggling at 19 for two in 4.1 overs.
With wickets of Moeen Ali (3), Eoin Morgan (6) and Jos Buttler (6) falling in quick succession, England top and middle order were back in the pavilion, reeling at 52 for six.
Bopara and Jordan tried to bring the team back on track but van Beek claimed the former's wicket to end all hopes of England. It was just a matter of time before England folded for a mere 88 runs to suffer a shock defeat.
Earlier, The Netherlands got off to a fine start after put into bat, but they failed to capitalise on it as they lost the momentum and could score just 49 runs in their last nine overs.
From 84 for one in the 11th over, Netherlands could reach 133 for five in 20 overs.
Opener Stephan Myburgh (39) first put on 34 runs for the opening wicket with Michael Swart (13), before sharing another 50-run stand with one-down batsman Barresi for the second wicket to provide Netherlands just the right rhythm.
After Swart's departure, Myburgh and Barresi launched an all-out attack, hitting the England bowlers at will to bring up 75 for one in 10 overs.
But the fall of Myburgh in 11.1 overs, courtesy Bopara, changed the equation completely.
Even as Barresi fought a lone battle in the middle, he kept losing partners at the other end, even as England bowlers succeeded in bringing down the run-rate considerably.
Stuart Broad was the pick of the wickets for England with figures of three for 24, while Jordan (1/13) and Bopara (1/15) chipped in with wicket apiece.