On Friday, Franz Josef Jung, Germany's defence minister, said: "Two soldiers have been suspended from their duties."
They are being investigated on suspicion of disturbing the peace of the dead, which is a legal offence in Germany punishable by up to three years in prison.
The scandal broke on Wednesday when Bild newspaper ran pictures of Bundeswehr soldiers mounting a skull on a vehicle bearing the German flag and the name of the Nato-led International Security Assistance Force (ISAF) in Afghanistan.
It escalated on Thursday when a television channel aired similar pictures which it said were taken in Afghanistan in March 2004, a year later than those published in Bild.
German state prosecutors told Bild on Friday that they were investigating criminal charges against seven suspects in total.
Jung has said most of the suspects had completed their tour of duty and left the army, but vowed that those still with the Bundeswehr would be dismissed.
Bild published an interview with an unnamed soldier on Friday who admitted that he was one of the troops who had clowned for the camera with a skull on a road outside Kabul.
The man claimed he had acted under pressure from his peers.
He said: "It was a stupid thing to do. I would rather not have been there. If you did not take part, it was like, 'you wimp, what is the matter with you?'"
The soldier said they had found the skull in a gravel pit, he said: "It was a big gravel pit, the kind from which Afghans take soil to make bricks."
"The devil only knows how it got there. Perhaps dead bodies were dumped in the pit during the war."
He said it was well-known in the German contingent in Afghanistan that such incidents had taken place.
"It was well-known among the lower-ranked soldiers. They found it quite funny."
Germany is the second biggest contributor of peacekeepers to Afghanistan with 2,750 troops and holds the command of ISAF in the north.