"Rightwing extremism in all forms poses a very serious threat to the societal and economic development" of eastern Germany, said Iris Gleicke, who is the government's point person for national unity.
"Determined action from the government, the states, communes and civil societies is necessary to ensure peace in eastern Germany," she told reporters as she presented the latest report examining progress since German reunification in 1990.
The annual report had in previous years been largely focused on economic regeneration for the impoverished region which has experienced a wave of depopulation as mostly younger people left for the west for jobs.
But rising xenophobia has emerged as a key concern this year, as anger over the arrival of around a million asylum seekers in Germany in 2015 is running high in many eastern states such as Saxony, Saxony-Anhalt and Mecklenburg-Western Pomerania.
It has also fuelled a surge in support for the right-wing populist AfD party, which has run an anti-migrant and Islamophobic campaign.
Eastern states have been required to take in relatively few numbers of new arrivals compared to western states, under a quota system calculated by the size of the state's population and income.
But instances where asylum seeker accommodation was set on fire and assaults against refugees have shot up dramatically in the region, noted Gleicke.
"I am disturbed by this rising far-right and xenophobic violence. It is more than an alarm bell if the attacks and violence are backed by or quietly accepted by mainstream society," she said, adding that the incidents had sparked outrage worldwide.
Former communist eastern Germany has been the scene of several ugly incidents in which far-right extremists have targeted asylum seekers.
Clashes broke out last week between dozens of asylum seekers and far-right extremists in the eastern city of Bautzen, forcing police to call in reinforcements to quell the violence.
In February, a cheering crowd was seen outside a burning asylum shelter in the same town, clapping and shouting: "Good, that's up in flames."
That same weekend, a video emerged of far-right thugs intimidating refugees - including crying children - and preventing them from getting off a bus to get into another shelter in the eastern town of Clausnitz.