The 500-kilogramme (1,100-pound) aerial bomb, thought to have been dropped by American forces, was discovered during construction work earlier in the week.
“Good news: the bomb has been defused! Citizens may return to their homes,” the city of Ludwigshafen said on its official Twitter feed.
It also posted a picture of the freshly unearthed, corroded bomb, strapped to a pallet before being removed from the area.
Authorities in the western city had ordered all those living within a 1,000-metre (0.6-mile) radius of the bomb site to leave their homes from 08:00 am (0600 GMT) as a precaution ahead of the defusing operation.
It took the bomb squad just over an hour to complete the delicate task, and the all-clear was given shortly after 2:00 pm.
More than 70 years after the end of World War II, Germany remains littered with unexploded ordnance, a legacy of the intense Allied bombing campaign against Nazi Germany.
In the biggest post-war evacuation to date, some 60,000 Frankfurt residents were evacuated last year so that an unexploded 1.8-tonne British bomb dubbed the “blockbuster” could be defused.
In April, thousands had to clear an area around Berlin's central railway station after another British bomb was discovered on a building site.
Unexploded munitions have also complicated the work of firefighters this summer, with forest fires sparked by a spell of hot, dry weather setting off long-buried ordnance, causing small explosions on several occasions.