Putin also claimed his troops had pulled back from the Ukraine border.
"I welcome the constructive tone that President Putin used after his meeting with the OSCE President Didier Burkhalter," Steinmeier said in a statement, calling for "what was discussed in Moscow" to be implemented immediately.
"The situation is critical, but there is still a chance that we can avoid a fresh escalation in violence and the total loss of control in eastern Ukraine by diplomatic means," he said.
However the pro-Russian decided on Thursday to go ahead with independence referendums as planned for Sunday.
Steinmeier also said Chancellor Angela Merkel had voiced her concern to Putin about media reports the Russian president may attend Friday's military parade in Crimea.
"The chancellor has asked him personally about this," said Steinmeier on Thursday. "He left the answer open about whether he would personally attend."
If Putin is present at the Sevastopol event – a commemoration marking victory over the Nazis in World War II – it would be his first visit to the peninsula since Russia annexed it from Ukraine in March.
"The military parade is not good," given the contested location, added Steinmeier on German TV. "Were Putin to take part, it would make things more difficult than they already are."
Merkel on Tuesday said it would be a "pity" if Putin were to "use" the commemoration for visiting Crimea amid the ongoing standoff with pro-Moscow separatists in eastern Ukraine.