The cabinet approved plans for a permanent exhibition in central Berlin on the plight of the refugees, many of whom faced brutal attacks as they were driven from their homes in central Europe in the dying days of World War II. It said the project would also put their fate in the context of Nazi aggression which set off the vicious circle of violence and reprisals - a move the government said had quieted objections raised in Prague and Warsaw.
The exhibition is also to tell the story of millions of other, non-German displaced people in eastern Europe during the same period and in the decades that followed.
"The aim is to create an appropriate and historically correct documentation of escape and expulsion as consequences of dictatorship and war," culture minister Bernd Neumann said. "This is an excellent step toward coming to terms with a painful chapter of 20th century German and European history."
Berlin has been wrestling for decades with a way to commemorate the up to 14 million Germans forced to leave their homes in central Europe, including parts of modern-day Poland and the Czech Republic, at the war's end without whitewashing the role of the Nazis.
The debate had raised hackles among Germany's neighbours, prompting angry warnings against a memorial that put the Germans' suffering on a par with that of the Nazis' victims.
Neumann said that talks between German and Polish officials in Warsaw in early February had removed the final obstacle to the centre, which will have a budget of €29 million ($45 million dollars) plus €2.4 million annually for temporary exhibitions.
It was not immediately clear whether one of the most controversial advocates of a memorial, the provocative head of the Federation of the Expelled, Erika Steinbach, would participate in the project.
Government spokesman Thomas Steg said only that a representative for expelled Germans would serve on the centre's board.