"What it's about now is to re-establish an orderly and traceable way of dealing with the large number of refugees," Merkel said after the meeting, which stretched well over schedule into the night.
The Chancellor's main aim is to do a better job of spreading new arrivals out among the states so that no one regional authority is overburdened.
"The federal government, together with the states, will in the future manage the distribution of refugees to individual states," she said.
Authorities will use the so-called 'Königstein formula', based on states' tax income and populations and more usually used to share out federal cash, to decide how many people should be hosted in each state.
Angela Merkel with state leaders and officials in Berlin on Tuesday night. Photo: DPA
Merkel added that the federal government would also open up an extra 40,000 emergency accommodation places and would set up distribution centres.
"Hubs like this are necessary" to organize the huge logistical operation, Merkel said.
More soldiers from the Bundeswehr (German army) will stand ready to help out local authorities wherever needed.
But the quick-fire agreement on Tuesday evening is just a forecast of the wrangling to come in a week's time, when state and federal governments are set to debate how the costs of taking in so many refugees will be shared out and what new laws will be necessary to deal with them.
The federal government has already promised €1 billion extra in 2015 and €3 billion in 2016, and is recruiting more officials to the Federal Office for Migration and Refugees (BAMF) in what Merkel said would be a "gigantic test of strength" for her administration.
Overstretch in state governments' ability to take in refugees was a key element in the decision to re-introduce border controls last weekend.
State leaders from Brandenburg and Saxony-Anhalt said that their priorities were shortening the time it takes to process asylum applications and sending back those denied refugee status quickly to free up capacity for others.