Merkel's spokesman Steffen Seibert said the German leader had followed the by-elections Sunday "with great interest", and she felt they underlined the success of the country's nascent reform process.
"The citizens of the country have given a very impressive mandate for the future political work of the Nobel Peace Prize laureate," he said at a press conference.
"The opposition and the government should now be encouraged after this by-election to continue on the path of democratisation and reforms that they embarked on together," he added.
Seibert said the "largely democratic election" marked an "important success on the path of national reconciliation and democratic opening in Burma."
Suu Kyi's National League for Democracy party said it was on course to win all 44 seats it contested in the by-elections, in which a total of 45 seats were at stake - not enough to threaten the army-backed ruling party's huge majority in parliament.
The results marked a stunning turnaround for Suu Kyi, a former political prisoner, who was locked up by the former junta for most of the past 22 years.
After almost half a century of military rule, the junta handed power to a new government led by President Thein Sein a year ago.
The regime has surprised even its critics with a string of reforms such as releasing hundreds of political prisoners.
But remaining political captives, fighting between government troops and rebels, and alleged human rights abuses remain concerning for Western nations, who have imposed sanctions on the regime.
EU Parliament president Martin Schulz said he was "encouraged" by the elections "despite reported irregularities, which I hope will be addressed promptly by the authorities."
"I am convinced this vote will be deemed as historic," he said. "If followed by further reforms, it could be a turning point in Myanmar's history, marking the departure from autocracy to the path of democracy."
He renewed his invitation for Suu Kyi, who had spent much of the past two decades under house arrest, to visit the European Parliament to receive the Sakharov Prize for Freedom of Thought, which she was awarded in 1990.