The announcement came after thousands of workers from Germany's largest automobile factory in Sindelfingen, Baden-Württemberg where the C-Class series is currently produced, protested the rumoured move on Tuesday.
"This decision will also help to protect employment at our sites in Germany over the long term. Germany is and will remain at the heart of our production network," Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars, Dieter Zetsche said in a statement.
The company said that the decision would put the C-Class closer to its target market and improve profitability by removing exchange rate constraints.
In the future C-Class production within Germany will take place at the company's Bremen plant, which will see its focus of the SL roadster be transferred south to Sindelfingen.
The company does not plan to lay off any workers during the plant shuffle, though some 1,800 will be offered alternative employment opportunities, the statement said.
The Sindelfingen plant currently employs more than 28,000 workers.
The Alabama plant currently produces M-, R- and CL-Class sports utility vehicles, and rolled 152,561 vehicles off the assembly line in 2008.