Die Zeit reports that Angela Merkel made the decision in consideration of the current conflict in Ukraine.
“It is impossible for her to take part in the military parade in Red Square on May 9th,” someone from within the Chancellor's circle told the weekly newspaper.
Merkel received the invitation from Russian President Vladimir Putin last summer, but left it unanswered up until the last few days.
Merkel is reported to find it unthinkable to take part in a parade involving Russian tanks, which are in all probability being used in the east of Ukraine in support of pro-Russian rebel forces.
Western governments accuse Russia of deploying personnel and weapons in the Ukraine in support of the rebels fighting the government in Kiev. Russia disputes this accusation.
Russia traditionally celebrates the memorial day to mark the defeat of Nazism with a military parade in Red Square. Gerhard Schroeder was the first German chancellor to attend in 2005. Merkel followed suit in 2010.
But Merkel has decided not to completely ignore the occasion. Die Zeit reports that she will instead travel to Moscow on May 10th to visit The Tomb of The Unknown Soldier at the wall of the Kremlin with Putin.
Putin spokesman Dmitry Peskov, when asked whether the Kremlin had been notified of Germany's decision, said: "I don't have this information."
But he said the refusal by some Western countries to attend would not affect the Victory Day festivities.
"This will not affect the spirit of the holiday, its emotional aspect and the scale of the festivities," Peskov said on radio station Russkaya Sluzhba Novostei.
Merkel follows the Presidents of the USA, Poland and the Baltic states in rejecting Putin's invitation. French President Francois Hollande and British Prime Minister David Cameron are yet to give an official statement on their intentions.