Dominic Solanke put the Three Lions ahead in the first half but Jari Schuurman's equaliser meant the game finished 1-1 after normal time.
At schoolboy level, halves consist of 40 minutes each but after the 80 minutes were up, the final went straight to spot kicks with no extra time.
While Holland missed twice in the shootout, England held their nerve, scoring all four of their kicks to take the title.
England were the better of the two sides in the opening stages and took the lead in the 25th minute through Solanke.
Holland failed to clear Patrick Roberts' corner and as Taylor Moore fired the ball back into the box, Solanke took a touch before poking the ball home for his fourth goal of the tournament.
England deserved their lead but were pegged back on the brink of half-time as a superb flick from Steven Bergwijn allowed Schuurman to break through and equalise.
Dani van de Moot and Roberts both had chances to win the match in the latter stages but neither team were able to find a winner.
Van de Moot's opening penalty was saved by Newcastle keeper Freddie Woodman and while Schurrman scored, Calvin Verdonk then fired wide.
Ryan Ledson, Taylor Moore and Callum Cooke had already found the net for England allowing Jonjoe Kenny to convert and ensure England lifted the trophy.
"In my opinion, we were worthy winners," said U17s head coach John Peacock, who collects his second Euro title after leading the squad of 2010 to the same honour.
"It was always going to be a close encounter and it was certainly that – but over the 80 minutes we were the best team.
"I thought we showed character. We deservedly took the lead in the first half and it was a knock-out blow to concede before half time but the character we showed in the second half was first class.
"I told them at the break they were exceptional for 39 minutes, defended and passed really well and I thought we were in control and frustrating the Dutch.
"It was a good goal from them, but I just told the boys to remember the other 39 minutes and get back out there and get off to a good start."
Holland had defeated England in their group, when the two competed in a dead rubber contest with wholesale squad changes after qualifying by each winning their first two matches against hosts Malta and Turkey.
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