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Fernando Santos' side leapfrogged Croatia and Uruguay.
Portugal beat the Netherlands 1-0 in the final in Porto thanks to a second-half strike from Goncalo Guedes, after a Cristiano Ronaldo hat-trick had seen them past Switzerland in the semis.
The Dutch, who failed to qualify for both Euro 2016 and last year's World Cup, also gained two spots, rising to a tie for 14th.
Belgium remain atop the rankings ahead of world champions France after back-to-back 3-0 wins over Kazakhstan and Scotland in Euro 2020 qualifying.
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FIFA rankings
1. Belgium
2. France
3. Brazil
4. England
5. Portugal (+2)
6. Croatia (-1)
7. Spain (+2)
8. Uruguay (-2)
9. Switzerland (-1)
10. Denmark
Selected:
11. Germany (+2)
= Argentina
13. Colombia (-1)
14. Italy (+3)
= The Netherlands (+2)