With 24 large concrete slabs set up in a garden next to Bjoern Hoecke's house, the art collective "Centre for Political Beauty" said it wanted to send a daily reminder of the World War II horrors that led to deaths of six million Jews.
"We are doing our neighbourly duty," the group's leader Philipp Ruch told the Frankfurter Rundschau newspaper.
"We hope he enjoys the view every day when he looks out the window."
The slabs are a smaller-sized replica of the famed Holocaust Memorial in Berlin, which consists of a solemn field of 2,700 grey blocks meant to evoke a cemetery.
Leading Alternative for Germany (AfD) member Hoecke provoked outrage in January when he labelled the tribute to the victims a "monument of shame in the heart of the capital" and urged Germans to focus less on their WWII guilt.
Ruch revealed that the protest group had secretly begun renting the property next door to Hoecke's house in the bucolic central village of Bornhagen 10 months ago, in response to the controversial speech.
"He will now have to deal with the fact that he has neighbours who don't consider the Holocaust Memorial a 'monument of shame', but who try to remember what had happened, to prevent it from happening again," Ruch told the daily.
The group launched a crowdfunding campaign to keep up the protest action for at least two years, and reached its initial goal of €28,000 ($32,000) by mid-morning on Wednesday.
It is now hoping to raise €54,000 to maintain the installation for five years.
On their website, the art collective urged Hoecke to show contrition by "falling to his knees" in front of the memorial, recalling a gesture made by former chancellor Willy Brandt in 1970 at a monument to the heroes of the Warsaw Ghetto Uprising.
There was no immediate reaction from Hoecke to the stunt but the far-right Compact magazine, which has close ties to the AfD, condemned the "political war" being waged by the far-left.
Hoecke's notorious speech proved divisive even among fellow party members, highlighting the internal power struggle between more moderate and more hardline nationalist factions.
A possible expulsion of the AfD politician from the party will no longer be decided this year, but in January at the earliest, according to the German Press Agency (DPA).
The party had won nearly 13 percent of the vote in September's general election.