Merkel, 53, told the Süddeutsche Zeitung newspaper that she struggled to find accommodation when she moved to Berlin from Leipzig with her first husband in 1978 to work in a science institute.
"The state renting agency seemed to have forgotten about this building. It was empty. I was desperate, so I made use of the opportunity," the conservative chancellor said, but added that she nonetheless paid rent.
"I simply transferred money to the state renting agency in Mitte," she said referring to a district in the heart of the German capital.
"At the time all money was most welcome."
Merkel is the first German chancellor to have grown up in the former communist east.