At 2.10pm on Tuesday a man called police demanding a large sum of money by Wednesday or else he would set off a bomb already placed in the Heumarkt district, it was reported.
According to the Kölner Stadt-Anzeiger (KSTA), at 3pm police started evacuating the area, including hotels on nearby streets. All public transportation to the area was also stopped.
"I was on my way home to Martinsgasse and was stopped by police on the street. They sent me back to the Christmas market at Heumarkt," Christian Horst told KSTA. "They didn't tell me why."
After hours of searching, authorities did not find any explosives and opened the area again, allowing people back in to the area at 7.30pm.
"Cologne police initially could not determine the seriousness of the bomb threat and thus took extensive action," a police speaker said following the incident. "Several officers were in the area. Special forces and the bomb squad were notified. Officials of the state criminal police were also on hand."
Police, robots and bomb-sniffing dogs searched the area only to find nothing, resulting in authorities to call off the search.
The perpetrator made several calls to the police station, in which he told authorities the bomb was in a red pickup truck. A vehicle matching the description was found on Gürzenreichstraße, but no explosions were found in it.
Detectives are now combing through the phone calls for details about the caller.
According to the KSTA police would not confirm whether the caller said he was connected to the Islamic State (Isis) terrorist organization for "investigative reasons".
In November, raids in the city and surrounding district netted in the arrests of eight men for supporting jihad groups, including Isis.