The police believe a group of PSV supporters - who posed a threat of violence - were planning to travel.
The game was due to be played in Arnhem as part of the Fox Sports Cup being hosted by Eredivisie side Vitesse.
"We naturally share the disappointment of our supporters who have travelled," said Albion director of football administration Richard Garlick.
"It is a truly disappointing end to what had been some excellent preparation for us but the situation is out of our hands and we are working now to get the squad home as quickly as possible."
On Thursday, the Baggies beat Vitesse 2-1 in the first round of matches at the four-team pre-season tournament, which also features Portuguese club Porto.
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West Bromwich Albion's friendly against PSV Eindhoven on Saturday has been cancelled by Dutch police.