The labour ministry said it had been flooded with interest from job-seekers particularly from struggling Spain and Hungary for the scheme offering subsidized job training, apprenticeships and work in fields lacking manpower.
"Currently we cannot meet the demand" for the programme, called "The Job of My Life", a labour ministry spokeswoman told reporters.
Germany, Europe's top economy, faced criticism from its EU partners for an approach to the eurozone debt crisis that placed a strong emphasis on fiscal discipline, which has been blamed for exacerbating the economic impact among ts weakest members.
Berlin responded with initiatives to fight youth unemployment, both to help a "lost generation" out of work and to fill shortages in its own labour market in fields such as care for the elderly and gastronomy.
The programme is targeted at 18 to 35 year olds and was initially scheduled to run until 2016 but had been extended to 2018.
Those accepted receive financial aid to take German classes in their country of origin and assistance with job interviews and moving to Germany to take up work.
But the €400 million in funding earmarked for the initiative, including €48 million for this year, have already been used up.
The website of the programme, also known as MobiPro-EU and run by the Federal Labour Agency, said that as of April 8th it had stopped processing new applications.
It said that between January 2013 and the end of March 2014 nearly 9,000 young people from across the European Union had expressed interest in taking part.
A large majority came from Spain with nearly 5,600 requests.
"That is a lot more than we expected," it said.
The website, www.thejobofmylife.de, said that although the German government had made extra funding available, it could not accommodate new applicants.
However those currently enrolled in the programme will continue to receive the subsidies pledged to them.
It said that it would inform potential participants later this year whether acceptances could resume next year.