In 2012, Badawi received an worldwide Women of Courage award in a ceremony in Washington from former US Secretary of State Hillary Clinton and then First Lady Michelle Obama.
Saudi Arabia said it would recall its ambassador to Canada as well.
Saudi Arabia gave the Canadian ambassador in Riyadh 24 hours to leave the country and recalled its own envoy to Canada after the North-American country urged Riyadh to release arrested civil rights activists.
The severing of ties was made Canadian embassy in Riyadh said it was "gravely concerned" over a spike of arrests of human rights campaigners in the Saudi including gender rights activist Samar Badawi.
The move on Sunday came after Canada's Foreign Affairs Minister Chrystia Freeland tweeted on Thursday that Canada was "very alarmed" to learn Saudi authorities have arrested Samar Badawi, the sister of jailed Saudi blogger Raif Badawi, along with prominent activist Nassima al-Sada.
However, supporters of women's rights were arrested just weeks before the ban was lifted, signaling that only King Salman and his powerful son, Crown Prince Mohammed bin Salman, will decide the pace of change.
The UN has also voiced concern over the widening clampdown on opposition in Saudi Arabia, its human rights office (OHCHR) calling the spate of arrests that has been ongoing since spring "apparently arbitrary detentions". Some have since been released.
Representatives for Canada's foreign department didn't respond to a request for comment.
The Saudi foreign ministry calls the use of "immediately release" in Canada's tweet "unfortunate, reprehensible, and unacceptable in relations between states".
But the 32-year-old has simultaneously pursued a hawkish foreign policy - including leading a blockade of neighbouring Qatar and a bombing campaign against Huthi rebels in Yemen - while cracking down on dissent at home. Saudi Arabia is one of Canada's largest export markets in the region.
Raif Badawi's wife Ensaf Haidar lives in Canada and recently became a Canadian citizen.
"There isn't a strong bilateral trade relationship and poking the Trudeau government likely resonates with Saudi's hawkish regional allies".
Saudi investments in Canada include G3 Global Holdings Ltd., a joint venture between Bunge Ltd. and Saudi Agricultural & Livestock Investment Co., which purchased the former Canadian Wheat Board in 2015.