Merkel's attendance in France came two days after Sarkozy travelled to Germany to mark the 20th anniversary of the fall of the Berlin Wall.
"We will never forget to what point the French suffered because of the Germans in the first half of the 20th century," Merkel said on Wednesday.
"One must learn to rise above one's history," she continued, adding that "there is a force that can help us: the force of reconciliation".
The suffering of Germany, whose actions sparked both world wars, has only recently become the subject of public discussion after years of being a taboo.
"We gather this November to commemorate not the victory of one people over another, but hardship that was as terrible for one side as it was for the other," Sarkozy said.
"German orphans cried over the death of their fathers in combat just as French orphans did."
Tens of millions of civilians and soldiers were killed during the 1914-1918 war between Germany and allied nations, including France, Britain, the United States, Australia and Canada.
Sarkozy and Merkel reviewed troops posted around the Arc de Triomphe at the top of the Champs-Elysees Avenue and met with veterans of World War Two.
People across Europe also commemorated the day, with thousands in Britain pausing for the traditional two minutes of silence at 1100 GMT.
At 11am on Nov. 11, 1918 - the 11th hour of the 11th day of the 11th month - an armistice ended fighting on the Western Front, signed by the Allies and Germany in a railroad car outside Compiegne, north of Paris.
Britain's Queen Elizabeth II laid a wreath of poppies on the Grave of the Unknown Warrior at Westminster Abbey.
In Belgium, which saw some of the fiercest and bloodiest trench warfare, King Albert II led the royal family and government officials in a solemn commemoration in Brussels at the Tomb of the Unknown Soldier.