Two male passengers broke down the door to the driver's cabin after the tram sped past eight stations without stopping in the western city of Bonn late Saturday night.
They found the driver unresponsive in his seat but managed to halt the tram thanks to instructions given to a female passenger who was on the phone throughout with local transport operator SWB.
“They did exactly the right thing in a dangerous situation and possibly saved lives,” mayor Ashok Sridharan told the General-Anzeiger daily.
“Something like this should not be allowed to happen,” he added.
The 47-year-old driver was taken to hospital but has since been released.
He remains on sick leave but no further details were given about his medical condition.
The General-Anzeiger said passengers on the “horror tram” were terrified even if everyone escaped unharmed.
“We were afraid for our lives, there was nothing we could do,” it quoted 61-year-old Manfred Daas, who was travelling with his wife, as saying.
The SWB transport company faced mounting criticism over the incident on Monday, and prosecutors are investigating whether all the technical fail-safes had worked properly.
The Line 66 tram did not stop even after passengers repeatedly pulled the emergency brake, but the SWB said the brake only alerts the driver who then decides whether or not to stop.
The “dead man's switch” in the driver's cabin, designed to cut the engine if the lever is no longer activated, also did not kick into action because the driver's weight likely kept it pressed down, SWB said.
But the tram would have eventually slowed to halt by itself because some passengers had activated the emergency unlocking system on the doors, Jörn Zauner of the SWB told General-Anzeiger.
It remains unclear how fast the tram was going, with Zauner estimating it was riding at a speed of 40 to 70 kilometres per hour.