Two goals in the final eight minutes of the game, including six minutes of added time, broke Mexicans hearts, who had looked the better team for most part of the game.
Giovani dos Santos opened the scoring with a wonderful 48th minute strike.
Mexico after dominating play for the first hour of the match pulled down the shutter and inexplicably sat back allowing the Dutch back into the game.
The Dutch pressure finally told as Wesley Sneijder smashed the ball into the net in the 88th minute to bring his team back on level terms.
Mexico suffered their biggest heartbreak four minutes into added time when captain Rafael Marquez gave away a debatable penalty.
Klaas-Jan Huntelaar dispatched the penalty to end Mexico’s run in the tournament.
Mexico started the brighter of the two teams and held the possession well.
Mexico, meanwhile, were full of running and passed the ball superbly.
Besides playing excellent offensive football, the Mexicans were extremely well organised at the back.
They repelled everything that came their way with Arjen Robben, Robin van Persie and Sneijder having little say in the matter.
Mexico looked the more likely team to score and Dutch goalkeeper Jasper Cillessen had to pull out a few fine saves to keep the scores level.
The Netherlands failed to even test Mexican goalkeeper Guillermo Ochoa even once in the first half.
After the changeover, Mexico took the lead almost immediately with former Barcelona forward dos Santos breaking the deadlock with a brilliant shot from outside the box.
Mexico continued to dominate play with the Dutch feeling the heat, literally.
In the final half hour, the Dutch finally started showing why they are one of the favourites as they set up camp in the Mexico final third.
It was all ‘Oranje’ in the final quarter of the game and it was only the magnificent Ochoa that stood in the way of a Dutch equaliser.
Mexico adopted a defensive strategy, sat back and defended their lead.
With the time winding down, Mexico would have been dreaming of a quarterfinal berth.
But with just three minutes left on the clock, Sneijder finally broke through the Mexican defence to give his side a deserved equaliser.
There was more heartbreak for Mexico as Robben was fouled in the box by Marquez, a foolish foul to give away, with the referee pointing to the penalty spot.
Huntelaar, a substitute for Van Persie, stepped up and slotted in the penalty to give his team the unlikeliest of leads.