It also gave the Canadian ambassador 24 hours to leave the country and recalled its own ambassador to Canada, the statement by the Saudi foreign ministry said, adding it retained "its rights to take further action".
In a statement issued by the Saudi Arabian Foreign Ministry, Riyadh slams as "totally false" allegations by the Canadian authorities that recent arrests of several civil society activists were unwarranted.
"The Ministry of Foreign Affairs in Saudi Arabia briefed the Canadian Foreign Minister and the Canadian Embassy in the Kingdom on what they called civil society activists who were arrested in the Kingdom".
"Any other attempt to interfere with our internal affairs from Canada, means that we are allowed to interfere in Canada's internal affairs".
The Saudi ambassador to Canada has been recalled to the peninsula for "consultation".
Badawi and another high-profile Saudi women's rights activist, Nassima al-Sadah, were arrested in the kingdom last week, sparking an worldwide outcry.
The dispute appears centered around a tweet by Global Affairs Canada calling on the kingdom to "immediately release" women's rights activists recently detained by the kingdom.
Ensaf Haidar, the Canadian wife of Raif Badawi, told CBC News on Sunday that she was taken by surprise by the news that Saudi Arabia is taking measures against Canada in retaliation for its support of jailed activists.
The arrests come weeks after more than a dozen women's right campaigners were detained and accused of undermining national security and collaborating with enemies of the state.
But the 32-year-old has simultaneously pursued a hawkish foreign policy - including leading a blockade of neighbouring Qatar and a bombing campaign against Iran-backed Huthis in Yemen - while cracking down on dissent at home. The Kingdom of Saudi Arabia expresses its absolute and categorical rejection of the position of the Canadian Government.
"There isn't a strong bilateral trade relationship and poking the Trudeau government likely resonates with Saudi's hawkish regional allies".
"Very alarmed to learn that Samar Badawi, Raif Badawi's sister, has been imprisoned in Saudi Arabia", Freeland wrote on Twitter.