President Susilo Bambang Yudhoyono was reportedly aboard his plane when he made his decision. It would have been the first state visit to the Netherlands by an Indonesian president in almost 40 years.
The issue for the Indonesian president is the separatist group the Republic of South Moluccas, which has a base in the Netherlands. The group asked a Dutch court to order the arrest of the Yudhoyono in connection with alleged human rights violations between 1999 and 2002.
Ethnic violence, focusing on Muslim and Christian divisions on Moluccas islands left around 5,000 people dead. Another half million were estimated to have been displaced from the archipelago. Many homes and buildings remain destroyed and haven't been rebuilt.
The estimated 1,000 hot, humid and mostly mountainous islands of Indonesia have a total land mass of just less than 29,000 square miles and are home to an estimated 2 million people. They are sometimes called the Maluku, or Spice Islands, well known for their nutmeg, cloves and mace.
"There has been a new development that has forced me to make this decision for our own interest," Yudhoyono said at 2:25 p.m., an hour after his plane was to have taken off from Halim Perdana Kusuma airport in East Jakarta.
"The Republic of South Maluku separatists are involved in the movement," Yudhoyono said, and his trip, had it gone ahead, might have created a "misunderstanding."
"In recent days, a group has filed a request to the court to make an issue out of human rights in Indonesia and request the court to arrest me during the state visit to the Netherlands," he told reporters after canceling his trip.
"What I cannot accept is if the president of Indonesia makes a visit to the Netherlands, after an invitation from the Netherlands, the court decides to arrest the president of Indonesia."
Yudhoyono said the trip has been rearranged but he gave no dates.
His three-day trip was at the invitation of Queen Beatrix of the Netherlands, made four years ago.
His decision was met with some criticism in the country's House of Representatives. A National Mandate Party politician, Teguh Juwarno, said Yudhoyono could become "a diplomatic laughing stock" within the international community.
The president should have gone, said Juwarno. Yudhoyono had nothing to fear about alleged human rights violations because he has a diplomatic passport and would be beyond Dutch law.
The last Indonesian head of state to visit the former colonial ruling nation was President Suharto in the late 1970s. Suharto was born in 1921 during the Dutch East Indies era when Indonesia was part of the Netherlands colony.
He ruled Indonesia from 1967-98 and died in January 2008.