Merkel kicked off a statement to the Bundestag lower house by addressing the issue of US snooping on German soil, which included her mobile phone.
Lawmakers will later return to the chamber today to debate the widespread surveillance by the US National Security Agency (NSA), which has sparked outrage in privacy-sensitive Germany and frayed ties with the United States.
"The transatlantic relationship and therefore also the negotiations for a free trade agreement are presently without doubt being put to the test by the remaining accusations against the US and the collection of millions of data," Merkel said.
"The accusations are grave. They must be explained and, more important still for the future, new trust must be built," she said to applause from lawmakers.
Her remarks came at the start of an address to the Bundestag on EU partnerships with eastern European nations.
She stressed that ties with the US were of "paramount" importance for Germany and Europe.
Lawmakers called the special parliamentary debate on the revelations that have put the US in the firing line and strained diplomatic ties, also casting a shadow over EU-US talks on what would be the world's biggest free-trade accord.
Merkel was not due to speak during the debate but was expected to face tough questions from opposition MPs, who have denounced the government's response as "feeble" until evidence emerged that the chancellor herself had been a target, reportedly since 2002.
With US President Barack Obama's June visit to Berlin still fresh in many minds, deputies will examine the impact on US-German ties of sweeping surveillance, revealed in leaked US National Security Agency (NSA) documents.
And they will likely hear calls for Germany to grant asylum to Edward Snowden, the former NSA contractor who is behind the leaks that have fed near-daily media reports for months and is wanted in the US on criminal charges.
Hans-Christian Ströbele, a veteran Greens party MP who recently met Snowden in Russia where he has temporary asylum, said Germany owed the US fugitive not only thanks but a safe and permanent residence.
"Granting him asylum wouldn't be about revenge or retaliation for spying onus. It would be a decision based on our fundamental values -- and a moral duty," he wrote in a New York Times editorial.
After evidence of US agents having tapped Merkel's mobile phone, part of wider revelations from leaked NSA documents from US fugitive Edward Snowden, she confronted President Barack Obama by phone last month.
Berlin also took the unusual step of summoning the US ambassador.