The 70-year-old is currently in charge of the Dutch national team for a third time and is set to lead them at the 2022 FIFA World Cup in Qatar.
Van Gaal made the announcement on Dutch TV show Humberto on Sunday and has already began treatment for the disease, although he had not informed his players about the development.
"I think you don't tell people you work with like that because it might influence their choices, their decisions. So I thought they shouldn't know," Van Gaal said.
"You don't die from prostate cancer, at least not in 90 percent of the cases.
"It is usually other underlying diseases that kill you. But I had a pretty aggressive form, got irradiated 25 times. Then you have a lot of management to do in order to go through life."
He continued: "I had preferential treatment in the hospital. I was allowed in through the back door when I went to an appointment and was immediately pushed into another room.
"I have been treated wonderfully. Of course you tell your friends and relatives about it. The fact that nothing has come out [in the media] yet also says something about my environment. That's great."
Some of Van Gaal's former clubs have already sent their best wishes.
Manchester United posted on Twitter: "Everybody at Manchester United is fully behind our former manager, Louis van Gaal, in his battle against cancer. Sending you strength and courage, Louis."
Barcelona wrote: Our thoughts and prayers go out to former Barça manager Louis van Gaal, who has been diagnosed with prostate cancer. Stay strong, Louis, and get well soon.
