That money is supposed to fund the institute for at least three years. It is being created in partnership with four German research institutes, including Berlin's Humboldt University, and will launch in October.
The Institute for Internet and Society will initially be located at Humboldt's law faculty and employ about 10 people. Its purpose will not be to study issues specifically related to Google, but rather to explore web innovations and their impact on users as well as regulation and copyright issues.
Specifically, the researchers want to launch something called “Regulation Watch,” which would compare internet regulations on a country-by-country basis. They also want to explore the consequences of internet censorship in countries such as China, which has created controversies for companies like Google.
Google Chairman Eric Schmidt has been a key proponent of the initiative since its announcement in February, although some have suggested it is a somewhat cynical move to win over sceptical German public and politicians.
But Humboldt University President Jan-Hendrik Olbertz dismissed the suggestion that Google might be able to influence research. He said it was common for companies and wealthy philanthropists to fund research institutions, usually with the strict understanding that they may not interfere.
Olbertz said the institute was important in order to learn “how we can use the internet responsibly.”
Google has not always had an easy time operating in Germany, which has notoriously tough data protection laws.
German politicians routinely criticise the US web giant for how it handles personal information and ten of thousands of Germans opted out of Google's online mapping service Street View last year, demanding images of their residences be blurred out.
Schmidt acknowledged as much earlier this year. In an article in Die Welt he wrote that data protection was a topic “near to my heart.”
Google spokesman Max Senges said the institute will seek out further funding in the near future, including from the German government and the European Union.
“We want to put the institute on a sound basis,” he said.