The economy had contracted by 4.7 percent in 2009 during the country's worst post-war recession, before rebounding to post the strongest growth since its reunification in late 1990s.
"We grew by twice the European Union average," Economy Minister Rainer Brüderle said in a statement.
He also noted that the number of employed workers in Germany had climbed to an all-time high of 40.5 million people. Germany was now "on the path to full employment," Brüderle said.
UniCredit economist Andreas Rees called it "one of the most mind-boggling turnarounds in German economic history" as the nation leapt "from annus horribilis to annus mirabilis."
Economists pointed out that while German exports contributed as usual to growth, an important development last year was stronger domestic demand, with corporate investment and private consumption also lending a hand.
Germany is Europe's biggest exporter, and Commerzbank chief economist Jörg Krämer said: "In two years' time, Germany will probably export more to China than to the US."
But the country's deficit widened to 3.5 percent of output last year, provisional figures showed. Berlin ended the year with a deficit of €88.57 billion ($115 billion),
the Destatis office said, surpassing the European Union ceiling of 3.0 percent
of gross domestic product (GDP).
In 2009, Germany posted a public deficit right at 3.0 percent of GDP, following a slight surplus the previous year. In October, German officials said they were confident of getting back below the EU threshold this year, but did not give a forecast figure.
Leading economic research institutes have said it could fall to 2.7 percent however, as Germany aims for an essentially balanced budget by 2016.
The country has benefited from a rebound in global trade that has raised tax revenues while falling unemployment has reduced the need for some public spending.
Officials have also launched an austerity plan aimed at realising savings of €80 billion by 2014.