"If through words and deeds the validity of [international] law and the inviolability of borders are questioned, then of course trust is lost," she told the German parliament.
When NATO leaders meet in Warsaw, "it will be in a phase in which the security situation has significantly changed in Europe," she said, also pointing at turmoil in Syria, Iraq and Libya.
The US-led alliance plans to finalise its biggest revamp since the collapse of the Soviet Union to counter what it sees as a revanchist and unpredictable Russia since the start of the conflict in eastern Ukraine and Russia's 2014 annexation of Crimea.
Merkel said that "Russia's actions have deeply disturbed our eastern allies" and require a "clear reassurance" of their safety under NATO's Article 5 on collective defence.
The German leader - a Russian speaker who has maintained dialogue with Russia's President Vladimir Putin throughout the Ukraine crisis, despite their differences - also said the West must keep talking with Russia.
"Deterrence and dialogue, the clear commitment to solidarity with our alliance partners pursuant to Article 5 of the NATO Treaty, and the outstretched hand of dialogue - these are not contradictory, no they are indeed indivisible," she said.
The Chancellor's comments appear to suggest a difference of opinion with her Foreign Minister on the approach NATO should be taking in dealing with Russia.
Foreign Minister Frank-Walter Steinmeier recently caused consternation among NATO allies by suggesting that the military alliance had been “warmongering” by engaging in military exercises in Eastern Europe.
"What we should avoid today is inflaming the situation by warmongering and stomping boots," Steinmeier told Bild in June.
"Anyone who thinks you can increase security in the alliance with symbolic parades of tanks near the eastern borders, is mistaken."