In addition, Parliament will consider making coronavirus injections mandatory from February.
About 68.7% of the German population is fully vaccinated, well below the minimum 75% targeted by ministers.
The effort to get more arm injections will be boosted by the addition of dentists and pharmacists to those administering them.
Speaking after a meeting with federal and state leaders, Merkel said the measures were needed as hospitals feared they would be overwhelmed.
Some hospitals in the south and east have transferred patients to other parts of Germany due to a shortage of intensive care beds.
New Variante Omicron adds to the concerns of health officials.
Ms Merkel said she was “depressed” by the force of the fourth wave of infections in the country, adding that she hoped a voluntary approach to vaccination would be more effective.
The COVID situation in Germany is “very serious”, she added, calling the new measures “an act of national solidarity”.
“The fourth wave has to be broken and it has not yet been achieved,” she said.
More than 73,000 new infections were reported Thursday, as well as 388 new deaths.
Ms Merkel is expected to be out of office by February, and the mandatory jabs will have to be debated in the Bundestag, in line with guidelines from the German Ethics Council.
She said she would vote for if she was still an MP.
Finance Minister Olaf Scholz – who is due to be elected Merkel’s successor next week – also backed the idea, like most Germans, according to opinion polls.
“If we had a higher vaccination rate, we wouldn’t be discussing it now,” Scholz said.
The new measures are expected to come into force in the coming days, once the 16 German states have incorporated them into the existing rules.