Germany will end free coronavirus tests in October, regional leaders and the federal government has agreed, in a push to incentivise more people to get vaccinated.
Covid-19 tests or proof of vaccination or recovery will be required to access facilities including restaurants, cinemas and gyms, in areas where the infection rate is high.
From October those who refuse to get jabbed will have to pay to prove they are infection-free, or risk being shut out.
Proof of test or vaccination will be required as soon as the rate of infections in a region reaches 35 per 100,000 people over seven days.
Children and people who for health reasons cannot be vaccinated will still be able to get tested for free.
Germany's incidence rate stood on Tuesday at 23.5, but several regions including Berlin and Hamburg are already past the 35 mark.
After delivering well over one million jabs a day at its peak, Europe's most populous country has seen the take up for inoculation against the coronavirus slow dramatically.
52 million people in Germany, 62.5% of the population, have had at least one dose of the vaccine.
"It is everyone's responsibility...to promote vaccination wherever possible," said Ms Merkel, urging "all friends and family members who have been vaccinated to promote this in their circles of friends and families and sport clubs".
Ms Merkel has repeatedly said she does not think it is right to make vaccinations compulsory.
But critics accused her government of using tests as a tool to pressure the population to get jabbed.
Alice Weidel, leader of the far-right AfD who is herself not vaccinated, said the move was an "indirect compulsory vaccination through restrictions, bans and additional burdens".
Germany's latest move is similar to new requirements in France of a health pass to access cinemas, cafes or trains.
In neighbouring France, vaccinations jumped after President Emmanuel Macron unveiled a plan for citizens to have to show a health pass for many daily activities.
The push by French President Emmanuel Macron for the health pass which is proof of either vaccination, a recent negative test or recovery from Covid-19, has sparked angry protests across France.
In Germany, regular protests have also broken out against coronavirus restrictions as well as vaccinations.
Armin Laschet, the conservative candidate to succeed Merkel, said Germany needed to increase testing and boost vaccinations.
"We want to and will test more to avoid a new lockdown," Mr Laschet told the North Rhine-Westphalia assembly.
Hoping to become chancellor after the 26 September election, Mr Laschet is desperate to avoid new restrictions and said Germany should introduce incentives to encourage more people to get vaccinated and also ramp up compulsory testing.
Germany has recorded more than 3,000 cases a day in the last week, bringing the total to 3.79 million.
Germany's death toll is 91,803. The nationwide seven-day incidence rose today to 23.5 per 100,000 people, up from 23.1 yesterday.
