It is the first time the Dutch government has given details of the raid, which targeted an alleged IS bomb factory in Hawija, north of Baghdad.
Large, unexpected secondary explosions meant the death toll was higher than anticipated, a ministry statement said.
Dutch sorties in Iraq ended last year.
The IS facility hit in Hawija on the night of 2 June 2015 was believed to be producing vehicle-borne improvised explosive devices (IEDs) used to attack coalition forces, the statement said.
It is not clear how many of the 70 killed were civilians or jihadists. And Dutch Defence Minister Anna Bijleveld said "the relationship between perished [IS] fighters and civilian casualties could not be determined afterwards".
She said the intelligence before the strike had indicated that "there were no civilians in the immediate vicinity of the target".
"The closest residences were outside the damage area... After the attack, however, more and larger secondary explosions took place than could have been expected from previous experience with the elimination of this type of target, resulting in a larger damage area," she added.
"It turned out that there were far more explosives in the IED factory than was known or could be estimated by the Netherlands on the basis of the information available... This also destroyed a large number of other buildings in the area."
The day after the Hawija bombing, US Air Force Lt Gen John Hesterman told a news conference that a "fairly small weapon" had been dropped on "a known IED building in an industrial area".
"The secondary explosion, which was caused from a massive amount of [IS] high explosives, was very large, and it destroyed much of that industrial area," he said, adding that the coalition had seen no evidence of civilian casualties.
Airwars, an organisation which tracks civilian deaths, concluded that at least 26 children and 22 women were among those killed in the incident.
The Dutch defence ministry also said on Monday that an air strike in the Iraqi city of Mosul on 20 September 2015 killed four civilians. A family home was bombed after faulty intelligence identified it as an IS headquarters, the ministry said.
The coalition task force fighting IS in Iraq and Syria reported on 26 September that it had conducted 34,573 air strikes between August 2014 and August 2019, and that at least 1,335 civilians had been unintentionally killed.
But Airwars believes between 8,214 and 13,125 non-combatants are likely to have been killed as a result of coalition actions over the same period.