In a surprise move, Social Democrats' leader Sigmar Gabriel on Tuesday said he was standing aside so the 61-year-old Schulz could replace him as chairman of the SPD and run as its candidate for chancellor.
The former bookseller - once likened to a Nazi camp supervisor by Silvio Berlusconi - had only announced two months ago that he was stepping down as head of the EU's only elected body to return to politics in his native country.
But with poll ratings consistently dwarfing those of the temperamental Gabriel, vice-chancellor in Merkel's coalition government, career politician Schulz was destined for a swift return to the main stage.
Despite his image as the ultimate Brussels insider, a December survey put Schulz's approval rating among Germans at 57 percent - matching that of the untouchable Merkel.
While polls have long given Merkel's conservative block a comfortable lead over the SPD, Gabriel said Schulz "would clearly have a better chance" in the September 24 general elections.
Observers say the stockily-built, bearded Schulz owes his enduring popularity in part to the fact that he managed to maintain a high profile at home during his years on the European scene, while staying above the rough-and-tumble of daily domestic politics.
Setting the tone for his campaign in a country where the eurosceptic, anti-migrant AfD party is on track to become the third-largest party, Schulz on Tuesday vowed to fight against the easy answers of populists.
"With me, there will be no Europe bashing. There will be no hounding of minorities," he said.
Berlusconi Nazi row
A dyed-in-the-wool pro-European, Schulz grew up just across the border from Belgium and the Netherlands during the boom years that followed the end of the Second World War.
He once dreamt of being a footballer, an aim he abandoned due to a knee injury.
After finishing Catholic school, Schulz ran a bookshop in a suburb of the western city of Aachen until 1994, but took an early liking to politics.
Aged just 19, he began his political career by joining Germany's Social Democratic Party (SPD).
At 31, he became mayor of Wuerselen, the youngest ever official to hold such a post in North Rhine-Westphalia, the most populous of the German states, and served for 11 years.
He was elected to the European Parliament in 1994 and his career in Brussels took off, becoming head of the SPD group of European lawmakers in 2000.
Schulz grabbed the limelight in 2003 during a memorable dust-up with then Italian premier Berlusconi.
In the debate Schulz referred to "the virus of conflict of interest" in politics - a barely veiled swipe at billionaire tycoon-turned-politician Berlusconi, provoking an infamous retort.
"I know a producer in Italy who is making a film about the Nazi concentration camps. I could see you in the role of a Kapo - you would be perfect," Berlusconi said, using a word meaning a camp inmate designated as a supervisor.
Schulz said: "My respect for the victims of the Nazis forbids me to respond," winning plaudits for his aplomb.
In 2012, Schulz became president of the European Parliament, where he breathed new life into the role as he pushed for MEPs to have more say in running Europe.
In 2014, he unsuccessfully ran against Jean-Claude Juncker in a race to become head of the European Commission.
"I want to become the first Commission president who is not the result of a backroom deal," Schulz said at the time.
But in his final years as parliament chief, Schulz all too often faced the criticism that he had become a symbol of corridor chumminess that has hurt the EU's reputation.
"Nobody can deny that Martin Schulz has propelled the parliament into the forefront of EU decision-making," said MEP Helga Stevens, a political opponent from Belgium.
"However, where he failed was in concentrating that power and influence in the hands of just a few men."
By Michelle Fitzpatrick with Alex Pigman, AFP