"The labour market continued to develop positively at the end of 2011 and we can look back on a good year, when unemployment dropped sharply, employment increased and demand for labour remained very high throughout the whole year," said the head of the Federal Labour Agency, Frank Weise.
Taking 2011 as a whole, the jobless total fell by 263,000 to 2.976 million in nominal or unadjusted terms, equivalent to 0.6 percent decline in the jobless rate to an annual average 7.1 percent, the Federal Labour Agency said.
Both the jobless total and the jobless rate were therefore at their lowest level since unification in 1991.
Looking at December alone, the jobless total actually increased slightly, with the number of people claiming dole rising by 67,000 to 2.78 million in unadjusted terms and the jobless rate edging up to 6.6 percent from 6.4 percent in November.
Economists point out, however, that unemployment tends to rise in the winter months as sectors such as the construction sector slow down and lay off workers due to the cold weather.
Adjusted for such seasonal factors, the numbers actually showed a monthly decrease of 22,000 to 2.888 million, according to separate data calculated by the Bundesbank.
The seasonally-adjusted jobless rate slipped to 6.8 percent in December from 6.9 percent in November.
That was much better than expected: analysts had been pencilling in a drop of just 10,000 in the jobless total and the jobless rate to remain steady at 6.9 percent.
"The German labour market has remained in fairly good shape in spite of the ongoing debt crisis and the cooling in global growth," said Barclays Capital economist, Thorsten Polleit.
Natixis economist Felix Eschwege saw the data as "very good news" for the German economy, Europe's biggest.
"Overall, 2011 was a good year for the German labour market," the analyst said.
The data "make us confident with our scenario of an unemployment rate of 6.7 percent for the whole of 2012," he added.
Heinrich Bayer at Postbank Research predicted a "tangible tailing off of upward momentum" on the labour market in 2012.
"Weak growth at the turn of the year will have left its mark," he said.
"Nevertheless, the German labour market will remain relatively robust and, in spite of all the crisis talk, 2012 will prove to be another record year for the labour market, both in terms of unemployment and employment."
Already on Monday, the national statistics office Destatis released data showing that the number of employed people in Germany hit a new record of 41.04 million in 2011, with more than half a million jobs created last year.
It was the first time the number of people working in Germany has risen above the 41-million mark, Destatis said. The population of the country is nearly 82 million.
The gains were spread across the economy, with the service sector registering a 1.2 percent rise in people employed and the construction segment up 1.7 percent, Destatis said.