Germany has recognised Libya’s rebels as “the legitimate representatives of the Libyan people”.
“We want a free Libya, in peace and democracy without [Muammar] Gaddafi,” Foreign Minister Guido Westerwelle said in the rebel stronghold Benghazi.
About a dozen states have recognised the National Transitional Council.
Germany came under criticism for its refusal to back a UN Security Council resolution authorising Nato action to protect Libyan civilians.
The NTC emerged from the forces which began a revolt against Colonel Gaddafi’s rule on 16 February.
After months of bloody conflict, Col Gaddafi remains in control of the capital Tripoli while the rebels hold Benghazi and much of the east.
His government said on Monday it had repulsed an attempt by rebels to take the western town of Zawiya, just 30km (18 miles) from Tripoli.
The town was under rebel control at the start of the revolt but troops backed by tanks recaptured it after two weeks of heavy fighting.