The pope has come under fire in Germany for lifting the excommunication of Richard Williamson, a British-born bishop who has denied that the Nazis used gas chambers to kill Jews.
The row prompted a highly unusual intervention from Merkel, who called on the Vatican Tuesday to clarify its position.
In a climbdown the next day, the Vatican called on Williamson to recant his position but did not reverse its decision to lift his excommunication.
Merkel on Thursday praised the Vatican's statement, describing it as an "important and good signal" and a "step forward" in the dispute.
According to a joint statement Sunday the pope and Merkel looked to put the row behind them.
"Pope Benedict XVI and Chancellor Angela Merkel have had the chance to exchange their points of view in climate of great respect, during a telephone conversation requested by the chancellor," the statement said.
A German government spokesman and the head of the Vatican press service signed off on the statement which described the conversation between Merkel and the pope as "cordial and constructive."
It was "marked by the common and profound understanding that the Holocaust still represents a valid warning to humanity," the statement added.
Pope Benedict may pay an official visit to his native Germany next year for the 20th anniversary of the country's reunification, the head of the German Bishops' Conference said Friday.
In a recent interview with Germany's Der Spiegel magazine, Williamson said he would not recant his comments on the Holocaust until he had had a chance to look over the "historical evidence."