"Rising food prices mean that biofuel can contribute to increased world hunger. That's why we need to suspend E10," Development Minister Dirk Niebel told the ntv television station on Wednesday.
Niebel's demand for an immediate stop to the sale of E10 biofuel at German petrol stations has been welcomed by German aid organisations.
E10 - which was introduced last year and has in any case proved unpopular among German drivers - contains 10 percent bioethanol produced from corn crops which could otherwise be used to make foodstuffs.
It was promoted as contributing to reduction of carbon dioxide emissions, as well as the 10 percent being renewable rather than fossil fuel.
"It's unjust and irresponsible that people have to starve so that we can fill up our cars with an apparently clean conscience," Rainer Lang, spokesman for the "Brot für die Welt" protestant aid organisation told the Westdeutsche Zeitung on Wednesday.
The German World Hunger Association also welcomed Niebel's suggestion that food production should be the priority in times of drought and famine and agreed that growing corn for biofuel was inappropriate given the dramatic rise in food prices.
"We need to consider in the cabinet how we can solve the conflict between the pump and the plate," said Niebel.
The price of corn is currently rocketing as the worst drought for more than 50 years hits the USA. According to the UN, one in seven people on the planet - or 925 million - do not get enough to eat.
Meanwhile, the German biofuel industry has denied it exacerbates world hunger, wrote Die Zeit newspaper on Thursday.
"Only 4 percent of the German corn harvest went on bioethanol production last year," managing director of the German Biofuel Industry Association (VDB) Elmar Baumann told the paper. A ban on E10 would do nothing to help the hungry in developing countries, he added.