Dutch ambassador Tjeerd de Zwaan spoke at a ceremony in Balongsari village, formerly known as Rawagede, where at least 150 people were killed.
He said the massacre was a tragedy and apologised in English and Indonesian.
Earlier this year, a court in the Netherlands ordered the government to pay compensation over the killings.
The case was brought by relatives of those who were killed.
Reports said the Netherlands would pay 20,000 euros to the relatives, but lawyers say the exact figure is still being negotiated.
The Netherlands had previously expressed regret over the killings, but never formally apologised.
Most of current-day Indonesia was ruled by the Netherlands from the 19th Century until World War II, when the Japanese army forced out the Dutch.
When the Dutch attempted to reassert control after the defeat of the Japanese, they met fierce resistance.
The Netherlands finally recognised Indonesia’s independence in 1949.