"The court will try serious crimes allegedly committed in 1999-2000 by members of the Kosovo Liberation Army against ethnic minorities and political opponents," the statement reads.
The court is set to begin operating by the end of the year.
The new court will be established under Kosovan law and will bring together international judges. It will not be an international court, but a Kosovan national court which will function outside of the country.
"It is important for justice to be done. So we are pleased to be able to offer the court a home," Dutch Foreign Minister Bert Koenders said, as quoted by the statement.
The parliaments of the two countries now have to ratify the agreement.
Kosovo broke away from Serbia and proclaimed independence in 2008. It has been recognized by 23 out of the 28 EU member states. Belgrade, however, considers Kosovo to be part of Serbia. Dozens more countries including Russia, do not recognize Kosovo as an independent state.
In August, the Kosovo government approved the establishment of a court for war crimes allegedly committed by ethnic Albanians who fought on the side of the Kosovo Liberation Army (KLA) during the war.