The Rotterdam diocese said in a statement it had contacted the police and dismissed the priest.
Rotterdam police spokesman Karel van Horssen confirmed the Church notification and said the investigation was launched immediately.
"In July 2009, the diocese was informed of the priest's suspected sexual abuse and embezzlement in Sri Lanka," the diocese said.
The priest whose name was not given worked in a Sri Lanka charity.
The diocese contacted the public prosecutor's office after an internal investigation, Pieter Kohnen, spokesman for the Dutch Catholic Church, told AFP.
Kohnen said last month that at least 1,100 allegations of sexual abuse committed by members of the Dutch Roman Catholic clergy in the three decades from 1950 had emerged in March.
The reports were logged by a commission set up in 1995 by the Church to help victims of sexual abuse by the clergy, he added.
Dutch religious leaders on March 9 ordered a "broad, external and independent" investigation of alleged sexual abuse of children by Catholic priests, and apologised to victims.
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