Steinmeier, who is currently on his third Middle East visit within a month, called off his planned meeting with President Assad, shortly before he was due to fly to Damascus from Amman.
He said a speech given by Assad earlier on Tuesday was "a negative contribution that does not do justice to the present challenges and opportunities in the Middle East."
Through positive, constructive action, Syria could regain the lost trust of the international community, he added.
"But the basic prerequisite for this is a clear and unmistakable commitment to putting regional differences in interests aside," Steinmeier said while at Amman's airport. "President Assad's speech today is a step in the opposing direction. That's why I have decided not to travel to Damascus."
Assad praises Hezbollah
In his speech, the Syrian president praised Hezbollah in its fight against Israel, describing resistance against the "enemy" as legitimate even as Israel said it should prepare for talks.
"I say to all those who accuse Syria of taking the side of the resistance that this is, for the Syrian people, an honor," he said in a wide-ranging speech that also took aim at Washington and anti-Damascus figures in Lebanon.
"This resistance is a medal to pin on the chest of every Arab citizen, not only Syria," he said, adding that the Lebanese guerrillas had "shattered the myth of an invincible army."
A total of 160 Israelis have been killed since July 12, most of them soldiers who lost their lives in combat with Hezbollah.
No peace in sight?
In the hard-hitting address at the opening of a journalists' conference in Damascus, punctuated by cheers and chanting from the audience, Assad accused the Jewish state of not wanting peace.
He said there was now a "new Middle East" after the month-long war between Israel and Hezbollah in Lebanon, which he described as a "planned aggression" by the Jewish state. He accused Israel of using the capture of two soldiers in a Hezbollah raid on July 12 as a pretext for launching its massive assault against Lebanon, which came to a halt after a UN-brokered ceasefire took hold on Monday.
"Peace would involve Israel returning occupied lands to their owners and restoring their rights," Assad said. "Israel is an enemy founded on the basis of aggression and hegemony."
"The peace process has failed. It has failed since its inception," he added. "We do not expect peace in the near future."
A missed opportunity
Assad's speech on Tuesday, which lead the German foreign minister to cancel his planned visit to Syria, was his first public speech since the start of the war in Lebanon.
In his speech, the Syrian president also lashed out at US policies in the region, accusing President George W. Bush of adopting "the principle of preventative war, which is in complete contradiction to the principle of peace."
Syria held political and military sway in Lebanon for years until it pulled out its troops in April 2005 under massive pressure following the murder of former Lebanese premier Rafiq Hariri.
Steinmeier had planned to try to further involve Syria in the peace process following the implementation of a ceasefire in southern Lebanon, possibly by offering economic incentives in return.
Now, however, the foreign minister has said he would prefer to fly on to Saudi Arabia where he is due to end his Middle East visit on Wednesday.