Steinmeier's comments came after telephone conversations with his Israeli counterpart Tzipi Livni and Palestinian president Mahmud Abbas on Monday, and with Israeli Defence Minister Ehud Barak and the foreign ministers of Syria and Egypt on Tuesday, the Foreign Ministry in Berlin said in a statement.
"In all of these conversations, the foreign minister expressed his concern that a further escalation could not only mean that the progress made in the... [peace] process is lost, but also that constructive partners for talks on the Arab side could turn their backs on it," the statement said.
"This could delay for years the chances for a peaceful solution," Steinmeier said.
Steinmeier also used the phone calls to explore the possibility of a ceasefire to allow "desperately needed" aid shipments to the people in Gaza, and to allow room for diplomatic efforts towards a lasting truce.
Germany's top diplomat also held "long talks" with French Foreign Minister Bernard Kouchner ahead of Tuesday's meeting of European Union foreign ministers in Paris to discuss the crisis.
Since Saturday Israel has carried out four days of aerial raids on Gaza, killing at least 363 Palestinians, readying troops for a land operation and warning its assault could last for weeks. The bombardment has killed several senior Hamas officials and reduced much of Gaza's infrastructure to rubble, but it has failed to stop rocket fire from the territory.
Three Israelis - two civilians and one soldier - were killed on Monday by rockets fired from Gaza, with one slamming into the southern port city of Ashdod more than 30 kilometres (20 miles) from the border. Hamas has warned it could launch suicide attacks inside Israel for the first time since January 2005.
German Chancellor Angela Merkel blames Hamas for the escalation of violence in Gaza because of the firing of rockets into Israel and the abandonment of its ceasefire, her spokesman said Monday.