Call for clarification
Merkel said she demanded more information from Iranian authorities on elections and the unrest following Friday’s polls.
"The German government is very concerned about the current situation," Merkel said Monday in Berlin.
She strongly criticized the "wave of arrests" during the demonstrations and the fact that foreign media were being hampered from reporting on the developments.
Allegations of election fraud called for a "transparent investigation," she said.
EU foreign ministers meeting in Luxembourg issued a joint statement expressing concern about the use of violence against peaceful demonstrators in Tehran.
"This is a situation that the Iranian authorities must investigate," their statement said.
Khamenei orders to examine fraud allegations
Amid the widespread international criticism and after days of unrest on the streets of Tehran, Iran's supreme leader Ayatolla Ali Khamenei has ordered the powerful Guardian Council to examine allegations of irregularities during Friday's vote.
Incumbent Mahmoud Ahmadinejad was declared winner with an overwhelming majority of more than 60 percent.
Opposition leader Mir Hossein Mousavi claims that Friday's polls were manipulated by widespread vote-rigging. He had called on Iran's top supervisory body, the Guardian Council, to nullify the election because of what he alleges were irregularities.
The interior ministry and Ahmadinejad have dismissed the criticism.
Authorities ban opposition rally
Earlier on Monday, the country's interior ministry banned an opposition rally planned for later that day.
"Some seditious elements had planned to hold a rally and by fabrication said they had permission from the interior ministry. Any disrupter of public security would be dealt with according to the law," a state radio announcement said.
In a statement, Mousavi condemned the ban, calling it an illegal act by the ministry. However, he called on his supporters not to stage any rally without permission in order to avoid "violence by violence-mongers," according to dpa news service.
Hundreds of thousands of pro-Mousavi demonstrators took to the streets of Tehran nonetheless.
Iranian state television said on Tuesday seven people had been killed near the site of a rally in Tehran.
The reports mark an escalation of violence after thousands of demonstrators clashed with police in Tehran on Saturday and Sunday. At least 60 protesters were arrested.
German Foreign Minister Frank-Walter Steinmeier has criticized Tehran over the election. He also condemned what he called "brutal actions" against demonstrators.
Berlin summons ambassador
Earlier on Monday, the German government summoned Iran's ambassador to express concern over Iranian authorities' violent response to demonstrations.
Deputy Foreign Minister Reinhard Silberberg told the ambassador that Berlin considers the attempts to prevent peaceful demonstrations "unacceptable."
Silberberg also demanded international media be allowed to report freely and reporters' security be guaranteed.
Editor: Jennifer Abramsohn