She said travel restrictions were being reviewed for those who had received two coronavirus vaccinations, after holding talks with Boris Johnson at Chequers on Friday.
But she revealed she had expressed “grave concern” to the Prime Minister over the number of football fans being allowed to attend Euro 2020 matches at Wembley.
Mrs Merkel had previously urged EU leaders to impose quarantine restrictions on Britons regardless of their vaccination status because of concerns over a surge in cases of the Delta variant.
Following talks at the Prime Minister’s country retreat in Buckinghamshire, she acknowledged the strain first identified in India was now spreading “very rapidly” in Germany as well.
“We have adopted certain protective measures when we were not so familiar with the Delta variant,” she told a joint press conference.
“We’re reviewing continuously our travel restrictions and we think that, in the foreseeable future, those who have received double jabs will then, according to our classification, and Britain now obviously is a high incidence area, will be able travel again without having to go into quarantine.”
Ms Merkel wished the England football team “the best of luck” following their historic victory over Germany at Wembley, but said she had questioned Mr Johnson over the high attendance.
“I say this with grave concern, I have also said this to the Prime Minister,” she said.
“We in Germany, as you know, have less people attend games in the Munich stadium, but the British Government will obviously take its own decision.
“But I am very much concerned whether it is not a bit too much.”
Mr Johnson was forced to defend his approach to attendance during the tournament, saying sporting events were being opened up in a “very careful and controlled manner”.
“The crucial point is that, here in the UK, we have now built up a very considerable wall of immunity by our vaccination programme,” he said.
The pair also discussed Brexit during Mrs Merkel’s final visit to the UK as Chancellor, in particular the Northern Ireland Protocol causing trade disruption from Britain.
Mrs Merkel said she was “optimistic” that “pragmatic solutions” could be brokered.
An extension to the grace period delaying a ban on the shipments of chilled meats to Northern Ireland from Britain was granted this week following UK-EU discussions.
Mr Johnson said: “I’m sure, as Angela says, with good will and with patience we can sort it out.
“Hopefully, as we said at our bilateral, when it comes to chilled meats the wurst is behind us, as I think Angela said, or maybe I said that.”
The Prime Minister and his guest were to have a working lunch of English asparagus tart, Oxfordshire beef fillet and baked custard tart. Sausages were, perhaps diplomatically, not on the menu.
Earlier, Mrs Merkel addressed a virtual meeting of the Cabinet – the first foreign leader to do so since US President Bill Clinton in 1997.
Mr Johnson also announced the creation of a new academic medal in the German Chancellor’s honour.