The judges' panel was made up of language scientists, a journalist and a guest from the world of German ‘humour'.
Each year since 1991, the jury has selected what they call the most offensive new or newly popularized phrase in order to "promote awareness and sensitivity of language".
Gutmensch - or do-gooder - had already been 2011's runner-up in the contest.
But repeated use of the word by right-wingers against the left in the refugee debate has been felt particularly deeply by German liberals since Angela Merkel's decision to allow Syrian refugees in from Hungary in summer 2015.
"The accusation of being a do-gooder or goody-two-shoes generalizes being helpful and tolerant as naive, stupid and gullible - or even as moral imperialism,” the panel complained, adding that it had even reached the mainstream press.
"The use of this expression blocks democratic exchange and substantial debate," the press release claims.
Mainstream news outlets responded to the announcement by sending out breaking news alerts and giving the 'worst word of the year' top billing on their websites.
EIL ++ Das #Unwort des Jahres 2015 ist "Gutmensch" +++- stern (@sternde) January 12, 2016
Not everyone was as impressed though.
Political scientist David Ermes criticized the attempt to brand right-wingers' vocabulary as beyond the pale, saying that it would polarize German politics still further.
"The worst word of the year shows the split in our society - and encourages it!" he wrote on Twitter.
Greece and gays in second and third
Gutmensch shunted Hausaufgabe - homework - down to second place on the list.
The selection of the word homework was the panel's attempt to criticize the German government for its treatment of Greece during the crisis over the Mediterranean country's third bailout.
Many German politicians repeatedly ordered Athens to "do its homework" - meaning to stop talking about reforms and actually bring forward some concrete proposals, or implement what had already been promised.
In third place came the word Verschwulung - the process of becoming gay - which was made popular by a book by right-wing author Akif Pirinçci called 'The great gayification', which claimed heterosexual men are becoming gay-ified in by consumerist, capitalist society.
Pirinçci made headlines at Pegida rally in October 2015 for a speech suggesting the government is so oppressive it might consider putting its own people into concentration camps.
The speech was widely misquoted in the mainstream media as suggesting that refugees should be put in concentration camps.
Last year's winner of the worst word award was Lügenpresse - lying media - a term coined by anti-Islam group Pegida to refer to the mainstream German press.
The winner of the word of the year for 2015, announced in December, was refugees (Flüchtlinge).