The mayor's office in the northern city of Rostock announced that the refugee girl and her father had received a limited residency permit until March 2016. The office could not immediately clarify what would happen after that date but said that the rest of the family would not be deported so that they could remain together.
Rostock's city Finance and Administration Senator Chris Müller said that he was pleased that the city had "provided some promising prospects within the framework of the legal guidelines."
He added that Reem was a good example "of successful integration in our Hanseatic city."
Merkel was criticized in July after she told Reem during a televised discussion forum that Germany could not admit everyone who wanted to live there.
Merkel then put an arm round Reem and stroked her cheek when the girl started crying. The video clip of the exchange went viral, starting the hashtag #merkelstreichelt ("Merkel strokes"), with Merkel's critics accusing her of looking clumsy and lacking empathy.
Reem, a Palestinian refugee from Lebanon who has lived in Germany for four years, had told Merkel in fluent German that wanted to study at a German university, but that she didn't know whether she would be allowed to stay.
Merkel, who was criticized for being slow to condemn neo-Nazi violence against refugees in the eastern German town Heidenau last month, saw her approval ratings slip by 4 points to 63 percent.
A record 104,460 asylum seekers entered the country in August alone, and Germany expects about 800,000 people to file for asylum this year - four times the number of last year. Germany is the EU's biggest recipient of people fleeing war in the Middle East, as well as a growing number of economic migrants from southeastern Europe.
ss/bk (Reuters, AFP)