Defence Minister Ursula von der Leyen said that, aside from humanitarian aid, Germany could possibly send equipment such as helmets, night-vision equipment, booby-trap detectors and medical supplies for Iraqi soldiers.
"In Germany we are working at full speed right now on a coherent European package and on what the German contribution could look like," she said as EU envoys in Brussels were also discussing the issue.
Speaking during a Berlin meeting with her British counterpart Michael Fallon, she also said they both considered as "good and correct" the US air strikes against Islamic State (IS) jihadists and US arms shipments to help Iraq.
Von der Leyen reiterated her government's official position that Germany as a rule does not send arms into conflict zones but added that, if a "genocide" loomed in Iraq, this question should be "debated intensively" in Germany.
Several German politicians across the party spectrum, including Vice Chancellor Sigmar Gabriel, have suggested the rule may have to be reviewed in light of the IS onslaught across vast areas of northern Iraq.
Foreign Minister Frank-Walter Steinmeier also signalled a willingness to pave the way for German weapons shipments to support Baghdad, citing the "existential threat" posed by the IS, the Frankfurter Allgemeine Zeitung daily reported.
"We must see whether we can do, and must do, more," he told the newspaper, adding that "given the dramatic situation, I am ready to go to the limits of what is politically and legally feasible."
Meanwhile, the leaders of France and Germany called on Tuesday for the European Union to swiftly lend its weight to the humanitarian effort to help refugees in Iraq fleeing Islamic State militants.
In a joint statement, President Francois Hollande and Chancellor Angela Merkel said they wanted the EU to "participate as quickly as possible in the humanitarian operation under way to help the civilian population facing the acts of violence of Islamic State."
The leaders' comments came as EU envoys met in Brussels for an emergency meeting on the Iraq crisis.