Merkel made the remarks in a joint press conference with Chinese Premier Li Keqiang at Beijing's Great Hall of the People, on her seventh visit to China since taking office in 2005.
"If the reports are correct, it would be a serious case," Merkel said.
She added that "it would be for me a clear contradiction as to what I consider to be trusting cooperation between agencies and partners".
Following revelations last year that the US National Security Agency allegedly tapped Merkel's mobile phone, the reports of a German foreign intelligence service employee spying for the US have sparked anger in Berlin.
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"I expect now for everyone to assist in the speedy clarification of the accusations, and quick and clear statements, also by the US," German Interior Minister Thomas de Maiziere told Bild newspaper in comments released ahead of today's edition.
Germany's federal prosecutor-general confirmed last week that a man had been arrested Wednesday on suspicion of acting for a foreign intelligence service, but did not specify which one.
The FAS and the weekly Bild am Sonntag newspaper, which cited information from security officials, said the man had worked for the CIA and had handed over more than 200 documents in return for USD 34,000.