Foreign Minister Heiko Maas said Germany had caused "immeasurable suffering" to the Herero and Nama people, in what is now Namibia, in the early part of the 20th century.
Germany on Friday formally recognized as genocide the crimes committed by its colonial troops at the beginning of the 20th century against the Herero and Nama people in what is now Namibia.
It's the first time that Berlin has recognized the attrocities committed, with the declaration coming after five years of negotiations.
Foreign Minister Heiko Maas (SPD) said in a statement that as a "gesture of recognition of the immeasurable suffering" Germany caused, it would set up a fund amounting to €1.1 billion (US $ 1.34 billion).
Affected communities would play a key role in deciding what the funds were used for, the Foreign Ministry said in a statement, while legal claims for compensation would not be deducted from it.
The aim of the negotiations that lasted more than half a decade was "to find a common path to genuine reconciliation in memory of the victims," Maas explained.
This includes naming the events of the German colonial period in what is now Namibia and in particular the atrocities in the period from 1904 to 1908 "without sparing or glossing over."
"We will now, also in an official capacity, call these events what they were from today's perspective — a genocide," Maas said.
The foreign minister said that representative of the Herero and Nama communities were closely involved in the years-long negotiations with Namibia.
"The acceptance on the part of Germany that a genocide was committed is the first step in the right direction," President Hage Geingob's spokesman Alfredo Hengari told AFP.
Some representatives of the Herero and Nama peoples have voiced criticism of the agreement, saying that it was a PR stunt by Germany and a bid to defraud the Namibian government.
However, neither of the groups expressing objections — the Ovaherero Traditional Authority and the Nama Traditional Leaders Association — can be considered as representing all Herero and Nama groups.
Members of both groups have demanded an official apology from Germany, as well as financial reparation.
DW's political correspondent Emmanuelle Chaze called the move "highly symbolic" and pointed out that talks had been with the Namibian government rather than the Herero and Nama people directly.
Germany also chose to give a financial package rather than compensation for the colonial crimes which is what the affected groups had asked for, Chaze explained.
"The representatives of the traditional Herero and Nama communities would have liked Germany to agree to give compensation to atone for the past," she said.
The communities in Namibia have also asked for Germany to return the tens of thousands of stolen body parts belonging to their ancestors which are being kept in German museums and libraries. They also want looted art to be returned to the country.
Both issues remain to be addressed by German authorities.
German forces brutally repressed rebellions — here, a lithography from a German newspaper article at the time reporting on a battle with Herero people
Germany began talks with the Namibian government in 2015 on what was termed a "future-oriented reappraisal of German colonial rule.''
Germany's former development minister, Heidemarie Wieczorek-Zeul, offered her country's first apology for the killings on a trip to Namibia in 2004, where she said the country's actions would be seen as genocidal in today's terms.
The declaration is expected to be signed by Maas in the Namibian capital, Windhoek, in early June.
Parliaments in both countries must then ratify the declaration.
President Frank-Walter Steinmeier is then expected to officially apologize for Germany's crimes in front of the Namibian Parliament.
The German Empire was the colonial power in what was then called German South West Africa from 1884 to 1915.
During that time, its military forces brutally put down several rebellions, killing tens of thousands of people.
German General Lothar von Trotha, who was sent to quell a Herero uprising in 1904, was particularly known for his extreme ruthlessness.
Historians generally accept that up to 65,000 of roughly 80,000 Herero people living in the area at the time, and at least 10,000 of the roughly 20,000 Nama people, were killed.
ab, jsi, tj/msh (AFP, dpa)