The announcement came a day after the Hague-based Data Protection Agency warned Google it was breaching data protection laws by using personal details for targeted advertising.
Google faces a 15 million-euro ($18.7 million, roughly Rs. 119 crores) fine if it doesn't fix the alleged breaches by the end of February, the DPA said.
"The DPA has decided to investigate Facebook's newly-announced privacy policy," it said in Tuesday's statement.
"The DPA wants to know what the consequences will be for Facebook users in the Netherlands," it added.
Facebook last month announced worldwide changes to its privacy policy, which includes the right to share personal details and pictures from Facebook profiles for commercial purposes, the DPA said.
The watchdog had asked Facebook in a letter to hold off on the changes, set to come in on January 1, until the results of its probe were known.
The DPA added that because Facebook has a "company presence" in the Netherlands and was using Dutch citizens' details "it had the authority to act as a supervisor."
Facebook said it was "surprised and disappointed to learn about the DPA's inquiry," in a reaction emailed to AFP.
It denied it planned to use pictures posted on Facebook for commercial purposes, but said it could use profile pictures to appear alongside advertisements that had for instance been "liked" by users.
"This is no different from how Facebook has worked for a long time," one official told AFP.
The social network said that because its headquarters are in Dublin it falls under Irish data protection laws and would not delay the changes.
"As a company with international headquarters in Dublin, we routinely review product and policy updates... with our regulator, the Irish Data Protection Commissioner," Facebook said.
"We're confident the updates comply with the relevant laws."
The DPA on Monday gave Google two months to fix changes to its privacy policy introduced in 2012.
It said the Dutch recommendation followed similar probes by five other privacy regulators Britain, France, Germany Italy and Spain.
Google allegedly breached Dutch laws by, for instance, matching personal details to personalised adverts without "properly informing users or first asking their permission," the DPA said.
"Google traps users in an invisible net with our personal details without asking our permission," DPA chairman Jacob Kohnstam said in a statement.
"Google has until the end of February 2015 to implement the necessary measures to end the infringements," the DPA added.
If not, "a fine could run as high as 15 million euros ($18.7 million), the DPA said.
Google said it was "disappointed with the Dutch data protection authority's order, especially as we have already made a number of changes to our privacy policy in response to their concerns.
"However, we've recently shared some proposals for further changes with the European privacy regulators group and we look forward to discussing with them soon," it added.
Google on Tuesday went ahead with a vow to shut down its popular Google News service in Spain in protest at a new law which would make it pay for content.
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