The unemployed 38-year-old with refugee status had urged an Isis contact via mobile phone message service Telegram to send him €180,000, said prosecutors.
Police commandos raided his apartment in Saarbrücken near the French border around 2:00 am on Saturday, New Year's Eve. He was detained before being formally arrested on terror financing charges Sunday.
The man's "as yet undefined attack scenario" suggested the use of explosives-packed vehicles in Germany, France, Belgium and The Netherlands, said police.
Spiegel Online reported the plan was to re-paint the vehicles to make them look like police patrol cars.
It named the suspect as Hasan A. and said his contact was located in the militant group's de facto capital of Raqa, Syria.
The man had entered Germany in December 2014 and applied for asylum in January 2015, obtaining refugee status and a residency permit, prosecutors said in a statement.
The man had in December 2016 asked an Isis contact in Syria to send him the money "so he could purchase vehicles which he could load with explosives and which he wanted to drive into crowds... and blow up in order to kill unknown numbers of people who do not follow the Muslim faith".
According to messages found on his phone, the man said each vehicle would be re-painted and packed with 400-500 kilogrammes of explosives at a cost of €22,500 each, prosecutors said.
Prosecutors added that the man had "admitted contact with the Isis but denied terrorist motives" - suggesting that he claimed to have attempted to defraud the extremist group.
Investigators said there was no evidence the suspect had already obtained and prepared any vehicles for an attack.
Police said "an initial evaluation of the evidence did not point to a concrete threat to New Year's Eve events".