Fuelling hopes that Europe's largest economy can lead the continent out recession, the Ifo Institute's survey indicated business sentiment in November rose to 93.9 from 92.0, the eighth successive rise and the highest level since August 2008.
The figure was better than expected, with economists polled by Dow Jones Newswires only expecting a rise to 92.6 points.
“The German economy is working its way out of the crisis,” Ifo's president Hans-Werner Sinn said.
The positive report on sentiment followed data from the Federal Statistics Office confirming that German growth was improving after the country suffered its deepest recession for six decades.
Gross domestic product increased by 0.7 percent in the third quarter of the year, the fastest growth rate since early 2008, driven higher by companies replenishing their stocks. However, both exports and consumer spending remained weak and dragged down growth and economists warned Germany was not out of the woods just yet.
“The figures are sobering upon second look,” said Andreas Scheuerle from DekaBank. “The details show the economy is weaker than the numbers would suggest.”
The German government has raised its growth outlook for the whole year buoyed by optimistic data in recent months, but it still expects the economy to contract by around five percent, by far its worst post-war performance.
However, Berlin has forecast the economy will haul itself back into positive territory next year with growth of 1.2 percent.