Putin and his United Russia party have faced high levels of discontent in recent months, especially after December's fraud-marred parliamentary election.
That election prompted massive street protests that have evolved into regular, smaller rallies more recently decrying corruption, the growing authoritarianism of the government, and Putin's win in the March presidential contest.
Putin has toughened his stance against the opposition since winning a third term, rejecting dialogue with its leaders and stonewalling their demands.
Merkel said after meeting Putin that they had discussed "the development of civil society" in Russia.
"I made clear on my part that we have every interest in democratic diversity in Russia being able to develop further, because my experience is it is only that way that a truly robust civil society can arise which supports the development of the country," Merkel told reporters.
Putin, who was standing alongside her, did not respond.
Putin's trip, which started in Belarus, was to take him to France after his stop Friday in Berlin. His visit to the 17-nation eurozone's two biggest economies reflects a policy course driven primarily by Russia's economic interests.
Merkel said Germany wants to help Russia modernize its industry and pointed to the two countries' close cooperation on raw materials—exemplified by a new undersea pipeline that transports natural gas directly from Russia to Germany.