Merkel flew to Moscow to lay a wreath at the grave of the Unknown Soldier near the Kremlin walls, in an apparent compromise gesture after she skipped Russia's main festivities yesterday.
Meeting her host Vladimir Putin for talks at the Kremlin, she stressed the importance of cooperation.
"It's necessary for us to work, to cooperate including over complicated situations -- the way the situation is now -- and try to find diplomatic solutions," Merkel said at the start of the talks after the wreath-laying ceremony.
Russia yesterday staged a huge parade to mark the 70th anniversary of victory over Nazi Germany but most Western countries boycotted the festivities over Russia's annexation of Crimea and support for separatists in eastern Ukraine.
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In February, Putin hosted Merkel and French leader Francois Hollande for crunch talks over Ukraine, in what was the German leader's first Russian visit since the start of the crisis.
In recent months Merkel has played a key negotiation role over Ukraine, acting as a go-between for an isolated Kremlin and the West.
Political analyst Lilia Shevtsova said today's meeting between Putin and Merkel was highly symbolic.
"They are hardly happy to see each other," the prominent pro-Western analyst wrote on Facebook.
"He is trying to retain his seat at the table by turning to the shadows of the past and other people's glory."
"But she has not accepted his rules of the game having arrived to pay tribute to the people who won."
Many are concerned that Putin is using WWII festivities to justify Russia's meddling in Ukraine and promote his nationalism-tinged agenda.
"Everyone we wanted to see was here," he said in televised remarks yesterday evening.