Speaking at a press conference with her Serbian counterpart in Berlin on Monday, Merkel said Serbia had been "significantly" affected by the refugee crisis.
Serbian Prime Minister Aleksandar Vucic added that the issue concerned "not only the European Union but the whole of Europe."
Serbia is currently one of the most important transit countries for refugees traveling to western Europe from Syria, Iraq, Afghanistan or Pakistan. After arriving in Greece, many continue their journey through Serbia and Hungary before seeking asylum in Western Europe.
Over the weekend an estimated 20,000 refugees arrived in Germany having followed a similar route.
Clampdown on Balkan asylum
At the moment, however, many people from the Western Balkans are also attempting to seek asylum in Germany.
Merkel said she and Vucic had agreed that Serbia was a "safe country of origin," reiterating, however, that there was no reason for asylum applications from Serbia.
Vucic supported Merkel's comments, adding that laws should be adopted in Serbia which entail consequences for Serbian asylum seekers. The prime minister failed, however, to elaborate on his proposal, stressing only that there should be no incentive for Serbians to seek asylum in Germany.
Bavarian authorities in southern Germany took matters into their own hands last week when they opened the country's first reception and deportation center expressly for Balkan migrants.
Efforts to become EU member
The pledge for closer cooperation between Germany and Serbia on Monday came as the latter continues to work toward becoming an EU member state.
Merkel praised the country's recent efforts to abide by EU guidelines, with particular reference to the normalization of relations with Kosovo.
There had been "significant substantive progress," Merkel said, adding that the move had provided a "very important stimulus" for enabling EU accession negotiations.
ksb/kms (Reuters, AFP, AP, dpa)