The child was seen riding the bike, which has a top speed of 70 km/h, on a road in Tuttlingen, Baden-Württemberg.
Police said in a statement on Monday that the girl “did not possess a valid driving licence” and added the bike was not suited to riding on the road.
“It was an incident that would be more likely attributed to an adolescent or adult, not a three-year-old,” police said.
Her father, 22, was seen nearby giving her instructions on how to ride the small, diesel-engine bike.
Police seized the "pocket bike" and charged the father, as the child’s guarantor, for breaching insurance laws and licensing regulations.
Officers added that although it was only a small “pocket bike”, it could reach speeds of 70 km/h. They described the ride as "life-threatening".
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"The father did not realize that a bad accident would have happened if the girl had just given it a little bit more throttle," they added.