The work entitled "Petra" by 27-year-old sculptor Marcel Walldorf is made of silicone and metal and has pitted public officials against art world aficionados in the debate over what is acceptable in the name of high culture.
It depicts a young female police officer in full riot gear crouching to pee, with exposed buttocks and a small gelatin "puddle" affixed to the floor of the gallery at the Academy of Fine Arts in the capital of Saxony.
The work entitled "Petra" was completed one year ago and has captured a €1,000 ($1,328) prize by the prestigious Leinemann Foundation for fine arts.
"It shows very well the difference between the public sphere and the private sphere," the jury said.
But Saxon Interior Minister Markus Ulbig, who is responsible for the state's security services, told the German press he was "shocked" by the sculpture, which he branded "an insult to police officers."
The GdP police union also blasted the piece, saying it "breached the limits of artistic freedom."
"There have of course been letters of protest, particularly addressed to the artist," a spokeswoman for the Academy of Fine Arts, Andrea Weippert, told news agency AFP.
But she insisted that the public response had been "overwhelmingly positive."
"People who visit the show are not offended," she said.
She said she was surprised by the attention given to the display of "Petra" in Dresden as it had already been featured in smaller shows in the cities of Berlin and Leipzig.
"The artist is exploring a taboo zone. 'Petra' is not a provocation," she said. "It is an observation of society."