"We don't have all the information yet... But we fear that German citizens could be and probably are also among the victims and injured," she told reporters.
Merkel said members of a German tour group were among the likely casualties and that German officials were working with their Turkish counterparts to determine the identities of the victims and offer assistance to their loved ones.
"I will also speak with Turkish Prime Minister (Ahmet) Davutoglu about the situation in the coming hours," she added.
"Today it hit Istanbul, it has hit Paris, it hit Tunisia, it had already hit Ankara," she said at a press conference following talks with visiting Algerian Prime Minister Abdelmalek Sellal.
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"International terrorism once again showed its cruel and inhuman face and along with the sorrow that we of course feel, it once again shows the necessity to act decisively against terrorism and ultimately overcome these atrocities."
Foreign Minister Frank-Walter Steinmeier, whose ministry set up a crisis team in the wake of the attacks, also condemned the blast as a "barbaric" act of terrorism.
In the immediate aftermath of the suicide bombing, his ministry cautioned German citizens to avoid crowds and tourist sites in Istanbul.
It also warned of possible "political tensions as well as violent clashes and terrorist attacks across the country," adding that tourists should avoid large demonstrations.
Today's attack was carried out by a Syrian suicide bomber who blew himself up in Istanbul's busiest tourist district, killing 10 and wounding 15 in the latest deadly attack to hit the country.
Deputy Prime Minister Numan Kurtulmus said most of the dead were foreigners, but did not give details on their nationality. He identified the bomber as a Syrian national born in 1988.