The index of Germany's 30 leading blue-chip companies closed at 5,602.80 points, down by 5.82 percent after dropping over seven percent at one point.
The precipitous fall was the third consecutive decline for the DAX, erasing a minor recovery from last week. The index is down a whopping 21 percent this month.
Traders in Frankfurt said the sell-off gathered steam when the US stock markets opened sharply lower after data showed the world's largest economy appeared to be cooling.
But German equities took a hammering earlier in the trading day amid a slew of stop-loss orders, which are sales triggered after falling shares hit a certain price.
Investors continue to remain extremely jittery about Europe's ongoing sovereign debt crisis and America's sluggish growth.
“The markets were already appearing weak on Tuesday and Wednesday,” said analyst Christoph Schmidt at asset management outfit NMF AG, adding that bad US data was enough to push the DAX off the cliff.