Nicknamed "the faceless preacher" for showing his back to the camera in propaganda videos, the 33-year-old Iraqi was arrested last November on suspicion of being the "central figure" in an IS recruitment ring.
Walaa -- named by the authorities as Ahmad Abdulaziz Abdullah Abdullah -- appeared before a court in the northern German city of Celle alongside four co-defendants accused of supporting IS.
"The goal of the network was to send people to IS in Syria or Iraq."
The closely-watched terror trial, expected to run until early 2018, opened under heavy security with armed police on patrol outside the courthouse.
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"For a long time little has been known about the backroom men, those who seduce and incite to jihad," Der Spiegel news weekly wrote.
"The proceedings against Abu Walaa promise to give deep insights into these mechanisms, which makes this one of the most interesting Islamist trials in recent years."
A shadowy figure who long evaded capture, Walaa has been linked to some of Germany's most high profile jihadist attacks since arriving in the country in 2001.
After setting up his base in Hildesheim, a northern town seen as a hotbed of Islamic radicalism, he made a name for himself delivering extremist sermons at the notorious DIK mosque, which has since been shut down.
Walaa, who has two wives and several children, also gave seminars across the country calling for jihad. He notably spoke at a Berlin mosque frequented by Anis Amri, who drove a truck through a crowded Christmas market last December, killing 12 people.
Walaa's four accomplices -- a Turkish national, a German, a German-Serbian and a Cameroonian, aged between 27 and 51 -- are likewise accused of indoctrinating young men with jihadist ideology.
German media reported that among their "students" was at least one of the three teenage boys who last year set off a home-made bomb at an Indian wedding, badly wounding a Sikh priest.
Much of the prosecution's case rests on evidence collected by an unidentified informant who infiltrated the network for months.
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