The FINANCIAL — Libya’s rebels are “the legitimate representatives of the Libyan people”, said German Foreign Minister, Guido Westerwelle in the rebel stronghold Benghazi.
"We want a free Libya, in peace and democracy without Gaddafi," he added.
About a dozen states have recognised the National Transitional Council.
According to BBC, Germany came under criticism for its refusal to back a UN Security Council resolution authorising Nato action to protect Libyan civilians.
The NTC emerged from the forces which began a revolt against Colonel Gaddafi's rule on 16 February.
After months of bloody conflict, Col Gaddafi remains in control of the capital Tripoli while the rebels hold Benghazi and much of the east.
Speaking alongside rebel foreign minister Ali Issawi, Mr Westerwelle said: "We share the same goal: Libya without Gaddafi.
"The national council is the legitimate representative of the Libyan people."
Libyans listening burst into applause after he made the announcement.
A senior rebel official, NTC Vice-Chairman Abdel Hafez Ghoga, welcomed the German decision as a "very big step".
German opposition politicians, media commentators and foreign policy experts had sharply criticised the government for not joining Nato's air campaign, accusing it of failing to live up to its international obligations.