Turki Al-Ammar gave Saudi Arabia the lead in the first half only for Australia's Nathaniel Atkinson to equalise just before half-time.
Feras Albirakan put the Saudis back in front early in the second half, before Saud Abdulhamid wrapped it up in the 82nd minute to make it 3-1.
Cheap turnovers in their own half plaugued the Young Socceroos early in the contest gave Saudi the upper hand and set the tone for much of the match.
Just like they have for most of the tournament, Australia were forced to fight and scrap to remain in the game and Atkinson's goal gave them hope at the interval.
However, Saudi Arabia's agressive press proved too much for Ante Milicic's side as they conceded only five minutes into the second stanza.
Australia looked to fight back but they were unable to match it with the constant attacking raids of the Saudi's.
The result brings Australia's campaign to an end, and sets up a semi-final showdown between Saudi Arabia and Japan in Bogor on Thursday.
Ante Milicic's side has been hampered throughout the tournament with an outbreak of illness in the camp.
Australia have not played at an Under-20 World Cup since 2013.
