Watson was arrested last Sunday when he arrived in Frankfurt on an international arrest warrant from Costa Rica on charges relating to a high seas confrontation over shark finning in 2002.
The 61-year-old environmentalist will probably remain in custody over the weekend, his lawyer Oliver Wallasch said, as it would take a few days to raise the bail money.
Watson is accused of attacking the crew of a Costa Rican ship in Guatemalan waters with a water cannon.
Sea Shepherd is best known for its annual pursuit of the Japanese whaling fleet in the ocean near Antarctica, using increasingly militant ways to halt the hunt.
This year, after setting off from Australia, the group hurled stink bombs at the boats on the high seas and used ropes to try to tangle their propellers in a series of exchanges which saw the whalers retaliate with water cannon.
The whaling fleet killed less than a third of the animals it planned to because of the sabotage attempts.
Leader of the Greens' parliamentary party Volker Beck said Watson should not be sent to Costa Rica, while a small demonstration was held in front of the German Justice Ministry in Berlin during the week.
“It is to be feared that Paul Watson would not get a fair trial in Costa Rica,” said Beck, adding it was at least not unlikely that the fact that Watson was being pursued so long after the incident pointed to a political motive.
The Costa Rican government now has three months to submit a formal extradition request complete with supporting documentation. The German court will then decide what to do with Watson.