As the world's biggest exporter of goods, Germany is suffering more than other advanced economies from a collapse in foreign demand.
"The decrease of price-adjusted exports was markedly larger than that of imports," The Federal Statistics Office said on Friday.
Other European nations also revealed gloomy economic news on Friday, with Italy reporting a 2.4 per cent contraction in the first quarter of the year, its fastest rate since 1980.
In France, statistics showed output falling 1.2 per cent in the first three months. The government has forecast the country's economy will contract three per cent over the whole year.
The 16-nation eurozone also suffered its deepest slump since 1995, with the economy shrinking 2.5 per cent in the first quarter.
The latest drop in Germany is the fourth consecutive quarterly contraction to GDP in the country, Europe's biggest economy.
But some analysts say the country's economy could be on the way back up.
"Business sentiment in Germany and almost all other major economies have found its floor recently and showed encouragingly strong rebounds from their depressed levels," Alexander Koch, an economist at UniCredit in Munich, said.
He predicted the economy would contract a more modest 0.5 percent in the second quarter.
The government has forecast that Germany's economy will shrink by six per cent this year, followed by a 0.5 per cent return to growth in 2010.
Germany's economy grew 1.3 percent in 2008, about half as much as the previous year.