Interior policy spokespeople for Merkel's conservatives and her junior coalition partners the pro-business Free Democrats, Hans-Peter Uhl und Gisela Piltz, created the policy paper, daily Süddeutsche Zeitung reported.
A residence permit would be “limited to a year at most” pending the successful completion of a language test at an integration course, the paper wrote.
Pinning the right of residence to success in these courses “can give additional incentive for quickly integrating into German life,” said a spokesman from the Interior Ministry, which has embraced the proposal.
The paper said immigrants to Germany from certain countries – such as Turkey or Egypt - are already required to attend an integration course, but so far regular attendance has been sufficient to keep residency.
But now coalition politicians want to ensure that participants can actually speak German by the end of their course.
Meanwhile Horst Seehofer, head of the CSU Bavarian sister party to Merkel's Christian Democrats, also called for tougher language rules for immigrants, suggesting the addition of a commitment to the German language and basic German values.
Authorities should be required to not only support, but also demand integration, he said at a CSU party event in Passau on Wednesday.
But opposition centre-left Social Democratic interior policy expert Sebastian Edathy accused Seehofer of using “anti-minority sentiments out of desperation” caused by the CSU's internal struggles.
“Those, such as the CSU, who have denied the need to support integration for years, should make fewer statements and show more action,” Edathy told daily Handelsblatt.
Among those actions should be providing adequate funding for German courses, he added.
But Germany's new interior minister, Hans-Peter Friedrich, appears prepared to take a harder line on immigration. He recently re-ignited a debate about the place of Muslim immigrants in Germany by saying there was no historical foundation for Islam "belonging" in German society.
His comments sparked widespread outrage from Muslim groups, left-wing opposition parties and even members of Merkel's centre-right coalition.