The "totally unacceptable" abduction constitutes a "gross violation of international law", German government spokesman Steffen Seibert told reporters.
The diplomat, who was not named, has four weeks to leave Germany with his family.
"He is not part of the top tier of the embassy," foreign ministry spokesman Rainer Breul added, but "we have indications that he was involved in this incident" along with "several" other employees of the diplomatic mission in Berlin.
The German foreign ministry said Hanoi had failed to provide an "adequate" response after the expulsion last month of the Vietnamese secret services chief in Germany over the affair.
The target - Trinh Xuan Thanh, 51, who was in Germany seeking asylum - was spirited back to Vietnam last month, where he faces corruption charges that carry the death penalty.
German authorities also took into custody in late August a Vietnamese man suspected of involvement in the alleged kidnapping who had been extradited from the Czech Republic.
"We will not sweep this incident under the carpet," Breul said, adding that Berlin expected a formal apology and assurances there would be no other such "operations" on German soil.
The unprecedented case angered Germany, which summoned the Vietnamese ambassador and decried the "scandalous violation" of its sovereignty.
The ambassador was summoned a second time this week, Breul said.
The one-party state of Vietnam has waged an aggressive anti-corruption purge but analysts say it is often driven by infighting within the wealthy business-political elite as much as a true commitment to ending graft.
Thanh, the former head of PetroVietnam Construction Corporation, has been accused of mismanagement that caused losses worth $150 million (125 million euros), and vilified in state-controlled media for flaunting his wealth by driving a Lexus.
Also facing an embezzlement charge related to real estate deals which carries the death penalty, he had quietly slipped out of Vietnam in July last year.
Days after his abduction, a stone-faced Thanh reappeared on Vietnamese state television, which reported he had turned himself in.