"Multikulti", the concept that "we are now living side by side and are happy about it," does not work, Merkel told a meeting of younger members of her conservative Christian Democratic Union (CDU) party at Potsdam near Berlin.
"This approach has failed, totally," she said, adding that immigrants should integrate and adopt Germany's culture and values.
"We feel tied to Christian values. Those who don't accept them don't have a place here," said the chancellor.
"Subsidising immigrants" isn't sufficient, Germany has the right to "make demands" on them, she added, such as mastering the language of Goethe and abandoning practices such as forced marriages.
Turkish President Abdullah Gul, in a weekend interview, also urged the Turkish community living in Germany to master the language of their adopted country.
How to incorporate immigrants into society is a hot button issue in virtually every human society, so Germany is not unique in this regard. Historically, the United States, as a nation built from successive waves of immigration, has done that largely by the expectation that the children of immigrants, if not the immigrants themselves, will "melt" into the mainstream. This is also what France has been pushing of late, and Chancellor Merkel's fear that multi-culturalism simply isn't working for Germany may carry some weight outside of Germany, as well.