Merkel made the remarks in a joint press conference with Chinese Premier Li Keqiang at Beijing's Great Hall of the People, on her seventh visit to China since taking office in 2005.
"If the reports are correct, it would be a serious case," Merkel said.
She added that "it would be for me a clear contradiction as to what I consider to be trusting cooperation between agencies and partners".
Following revelations last year that the US National Security Agency allegedly tapped Merkel's mobile phone, the reports of a German foreign intelligence service employee
spying for the US have sparked anger in Berlin.
The US ambassador to Germany was asked to attend a meeting late on Friday at the German foreign ministry, after media reports that a 31-year-old man arrested last week had been feeding information to a US agency for two years.
"I expect now for everyone to assist in the speedy clarification of the accusations, and quick and clear statements, also by the US," Interior Minister Thomas de Maizière told Bild newspaper on Monday.
In a closed meeting, de Maizière spoke of the need for a "360-degree view" in intelligence matters, Bild newspaper reported.
This will in practice mean that German intelligence services should be equally alert to the activities of nominal allies like the United States, Britain and France.
According to the newspaper, the government has previously not monitored its allies, although this policy has increasingly come under question since the Edward Snowden NSA spy leak affair broke.
Citing a leaked interior ministry paper, Bild said German authorities were planning counter-measures, including in electronic surveillance measures.
And Foreign Minister Frank-Walter Steinmeier said: "If reports are correct, we are not talking here about small potatoes."
Germany's federal prosecutor-general confirmed last week that a man had been arrested Wednesday on suspicion of acting for a foreign intelligence service, but did not specify which one.
"All signs indicate that he was acting for the Americans," the Frankfurter Allgemeine Sonntagszeitung (FAS) newspaper quoted an unnamed senior official at Germany's foreign intelligence service, the BND, as saying.
The FAS and the weekly Bild am Sonntag newspaper, which cited information from security officials, said the man had worked for the CIA and had handed over more than 200 documents in return for €25,000.
According to Bild he handed documents over once a week for two years using an encrypted weather app on his phone. When he searched for the weather forecast in New York, the documents were transferred.
The man also tried to sell information to the Russians, according to reports.
In a statement on Monday, the US Embassy in Berlin said: "The United States is aware of the detention of a German citizen at the end of last week. We are aware also of published claims that he had been working with US intelligence.
"As a matter of policy, we do not discuss the details of pending law enforcement matters or allegations of intelligence activity.
"We are working with the German Government to ensure this issue is resolved appropriately."