Steinmeier said the fighting in eastern Ukraine had significantly reduced since a European-brokered ceasefire agreement was signed last month in Minsk. He was speaking during talks in Bucharest with Romanian President Klaus Iohannis.
"A clear beginning was made," Steinmeier said, according to a Romanian interpreter. "There's a significant reduction of violence after hardships at the beginning. Today, we don't have hundreds of breaches of the ceasefire, there are not many question marks regarding it."
Steinmeier said the Organization for Security and Cooperation in Europe would extend its mission in Ukraine, increasing the number of observers and the duration of the mission.
"It is important to allow the OSCE to control and verify these developments," he added.
Separatists have been waging an insurgency in eastern Ukraine since last April, after Russia's annexation of the Ukrainian territory of Crimea.
Western countries and Kyiv have repeatedly accused Moscow of helping the rebel offensive by sending troops and military supplies over the border - charges Russia has long denied.
Russia and Ukraine have agreed to double the number of OSCE observers from 500 to 1,000 to monitor the ceasefire, Steinmeier said on Friday.
Hopes for Moldova
Steinmeier said he hopes Moldova will stay on its pro-Europe path after the election of a government backed by a Communist party.
Steinmeier underlined Germany wouldn't "withdraw any offer" to Moldova, but said "it is Moldova's turn to react."
Pro-European parties won the elections on November 30 but failed to agree on a governing coalition, and they need the support of the Communist party, which favor slower reforms. However, Moldova signed an association agreement with the EU in June, angering Russia.
In late February, German Chancellor Angela Merkel was asked whether she thought Russia had its eye on Moldova, Romania's eastern neighbor, in a possible repeat of what has happened in Ukraine.
"Well, we hope not," Merkel said, after talks in Berlin with Iohannis.
Romania pushes for Schengen access
Another topic during Steinmeier's talks in Bucharest was a dialogue with Romania and Bulgaria about joining the EU visa-free Schengen Zone.
Romania, along with Bulgaria, joined the EU in 2007, but it was not until last year that citizens of both countries were allowed to move to other EU states to seek work. Romania also wants to join the 26-nation visa-free Schengen, but some EU nations are worried about mass 'poverty migration' and organized crime heading west.
Steinmeier said he was open to talks on the delicate subject of allowing Romania and Bulgaria into the Schengen Zone.
"The security situation has changed" in Europe, Steinmeier said, adding "we are going to continue working hard" so non-Schengen countries could meet membership requirements.
jil/jr (AP, Reuters, dpa)