"That anti-Semitism still exists is not to be denied. It is the duty of all of society to fight against it," Schröder said in a speech at Berlin's German Theater during a commemoration ceremony to mark the 60th anniversary of the liberation of the Nazi concentration camp Auschwitz.
The ceremony was attended by death camp survivors, ministers and Jewish leaders.
"It is the common duty of all democrats to confront the offensive agitation of the neo-Nazis and their continuing attempts to minimize Nazi crimes," Schröder said, in a somber address befitting the historic weight of the occasion.
More than one million people were killed by the Nazis, mainly Jews who were killed in gas chambers at Auschwitz, southern Poland from 1940 until the time it was liberated by the Red Army on Jan. 27, 1954.
Ceremony clouded by NPD scandal
"No strong democracy should tolerate the enemies of democracy and tolerance," said Schröder, dressed in a black suit and tie, adding that the full power of the state was ready to combat anti-Semitism.
"Right wing forces, with their dreary slogans and smear campaigns will receive the special attention of the police," he said, against the backdrop of two large black and white photographs of the camp and some of the survivors.
The anniversary commemorations in Germany have been tarnished by a far-right political party's refusal to observe a minute's silence for Holocaust victims in a regional parliament.
National Democratic Party (NPD) representatives in the eastern state of Saxony created a row on Friday when they walked out of the assembly in Dresden while members of other parties stayed to pay tribute.
Schröder's government has tried to ban the NPD for inciting racial violence but the case was thrown out in March 2003 after a two-year legal wrangle.
The NPD shocked mainstream parties when it won 9.2 percent of the votes in Saxony in September and secured seats in a German state assembly for the first time since 1968.
Chancellor expresses shame
Addressing a audience including the chairman of the World Jewish Congress, Israel Singer, and students, Schröder emotionally expressed his shame and recounted the atrocities committed by the Nazis.
"Sixty years after the liberation of Auschwitz by the Red Army I stand before you as the representative of a democratic Germany. I express my shame over those who were murdered, and before those of you who have survived the hell of the concentration camps," the chancellor said.
"Millions of children, women and men were suffocated by German SS troops and their accomplices with gas or starved and shot," he said.
"Jews, Sinti and Roma (Gypsies), homosexuals, political opponents, prisoners of war and freedom fighters throughout Europe were utterly destroyed with cold, industrial perfection or enslaved until their deaths."
During the ceremony, punctuated by at-times tearful speeches and stark pieces of music, he also paid tribute to the Jewish community.
"The Jewish community in Germany today is the third largest in Europe. It is vital and growing. New synagogues are being built. The Jewish community is and remains an irreplaceable part of our culture and society," he said.
In closing comments, the chancellor said the events of World War II and Germany's role in them would never be forgotten. "With you, I bow before the victims of the extermination camps. And if one day the names of the victims should fade from the memory of mankind, their fate will remain unforgotten. They rest in the heart of history."
In New York, Foreign Minister Joschka Fischer told the UN General Assembly Monday that Germany would always be linked to Israel by the events at Auschwitz.
"The state of Israel's right to exist and the security of its citizens will forever remain non-negotiable fixtures of German foreign policy. On this Israel can always rely," he said at a special UN session dedicated to the anniversary.
Singer slams European attitudes
However, World Jewish Congress chairman Israel Singer hit out on Tuesday at European attitudes toward Jews and called for a continent-wide commission to be formed to address the problem.
In a vehement speech during the commemoration ceremony Singer said that the lessons of the Holocaust were being forgotten.
"While apologists clamor Holocaust fatigue, deniers receive open forums to spread their lies and instructors teaching the Holocaust this week are shouted down by their students in various European countries," he said.
"And we experience insensitivity towards the Holocaust by Europe's younger generation, sometimes from the highest and most important families," he said, in an apparent veiled reference to Britain's Prince Harry dressing as a Nazi.