She also urged the withdrawal of all military forces "to their positions before the outbreak of hostilities" and said Russian air attacks on Georgian territory must be stopped "without delay."
Merkel spoke to Sarkozy -- whose nation holds the rotating European Union presidency -- ahead of an emergency meeting of EU foreign ministers in Brussels on Wednesday to discuss the bloc's response to the conflict in the Caucasus.
"The chancellor expressed once again her great concern about the further escalationof the situation in Georgia and the dramatic consequences for the suffering civilian population," her deputy spokesman Thomas Steg said.
Meanwhile, German Foreign Minister Frank-Walter Steinmeier spoke with his Russian and Georgian counterparts and also called for an "immediate end to the hostilities," his ministry said in a statement.
"In several subsequent phone calls with Moscow and Tbilisi, the foreign minister urged the resumption of direct contacts between the Russian and Georgian governments to allow a political resolution of the crisis to be reached," the statement said.
"These efforts are ongoing."
Steinmeier also spoke with the foreign ministers of France, Poland and Finland as well as US Secretary of State Condoleezza Rice and EU foreign policy chief Javier Solana.
And he sent Ambassador Hans-Dieter Lucas, the foreign ministry's envoy for Eastern Europe, Central Asia and the Caucasus, to Tbilisi where he landed late Saturday with representatives from the EU presidency and the Organization of Security and Cooperation in Europe (OSCE).
Berlin heads a loose alliance known as the UN Group of Friends of the Secretary General which has been trying to cool tensions between Moscow and Tbilisi over the breakaway Georgian republic of Abkhazia.
Steinmeier visited Georgia, Abkhazia and Russia in July to present a three-step peace plan but received a muted reception.
Finland currently heads the OSCE, which had been seeking a resolution to the ongoing conflict of the separatist, pro-Moscow region of South Ossetia before the latest fighting broke out.
Georgia declared what it called a "state of war" on Saturday as Russia bombed the former Soviet republic and their armies battled for control of South Ossetia.
Germany was a vocal opponent of Georgia's bid -- championed by the United States -- to obtain candidate status for NATO membership at a summit of the transatlantic alliance last April in Bucharest, in large part due to Georgia's unresolved conflict with Russia.
Steinmeier urged all sides to step back from the brink, warning that the fighting could spread "like wildfire" throughout the Caucasus, in an interview in Sunday's Bild am Sonntag newspaper.
The foreign ministry also issued a travel warning for Georgia, noting that there had been "bombing of strategic sites such as railways, ports and military installations outside the conflict areas proper."