"If we had a situation like the one in Paris, perhaps with attacks in three to four locations, we will have to think whether our police capabilities would be sufficient," Schäuble said at a meeting in Düsseldorf, the Rheinische Post (RP) reported.
But coalition allies from the Social Democratic Party (SPD) quickly pushed back against the idea of using soldiers within Germany in this role.
"It's not soldiers' job and they're not trained to take over the work of the police," Roger Lewentz, chairman of the German interior ministers' conference and interior minister for the federal state of Rhineland-Palatinate, told RP.
The German Police Union (DPolG) also firmly rejected the idea.
"We are totally against that. Our Constitution forbids it. Only the police can do the work of the police," DPolG president Rainer Wendt told The Local by phone on Wednesday.
"The Finance Minister ought to stick to his financial work and supply us better with the resources we need."
Their Bavarian Christian Social Union (CSU) allies have long hoped to integrate soldiers into an "total national security concept".
But the German Constitution sets strict limits on how soldiers can be used within the country and might need to be changed for such plans to go ahead.
While soldiers can be asked to support other branches of government in their work, they are not allowed to completely take over any of the state's duties.
Soldiers can only be used for internal security in the event of "an exceptional situation of catastrophic scale" – a rule confirmed by a Constitutional Court judgement in 2012.