The letter, addressed to President Joachim Gauck, did not contain an explosive substance as initially feared, the Federal Criminal Police Office (BKA) said on Friday evening.
Security personnel intercepted the package during a routine check of incoming mail and it was blown up in a controlled explosion on the grounds of the presidential palace Schloss Bellevue.
The website of the daily Die Welt newspaper had first reported the suspicious letter was filled with highly explosive powder known as HMTD.
Gauck, the country's ceremonial head of state, was not at his office at the time, his spokesman said. But he has since been informed of what happened.
As of yet there is no clue as to who sent the package, or why, but the federal police are investigating.
The German authorities now believe it might have been a copycat mimicking letters sent to US President Barack Obama and a US senator containing the highly toxic poison ricin earlier this week.
The incident at first appeared reminiscent of when an explosive package was sent to Chancellor Angela Merkel's office in Berlin, the Federal Chancellery, in November 2010. Rendered harmless with a water cannon at the time, that letter bomb was eventually traced to extremists in Greece.
Gauck, 73, who was a Lutheran Christian pastor in the former communist East
Germany and assumed his post as president early last year, is not considered a
divisive public figure.