A lacklustre performance in Paris saw Netherlands fall to their first defeat in 18 matches, a run that stretches all the way back to August 2012.
The 2010 FIFA World Cup runners-up only forced Hugo Lloris into one save in the whole 90 minutes, with Robin van Persie often looking isolated in attack.
Karim Benzema and Blaise Matuidi scored the all-important goals, but the Real Madrid striker had two other chances to score in a first half dominated by the hosts.
And Van Gaal knows his side have to improve quickly ahead of the FIFA World Cup.
"For 25 minutes we were the better team," said Van Gaal. "But after the goal we lost the plot.
"France have a very good team, but I do not think we should lose. We lost too many balls in midfield.
"It was not the most experienced team, and it was a better second half with more tactical discipline.
"In the second half we still created a few chances, at least more than in the first half, but then it was already too late
"We have to show something else in Brazil."
Netherlands have two friendlies remaining, against Ecuador and Wales, before the side's World Cup opener against Spain on June 13 in a re-run of the 2010 final.
