A day after calling Islam part of Germany, Chancellor Angela Merkel said her government would use all means at its disposal to fight intolerance and discrimination, calling the exclusion of certain groups from society "humanly reprehensible."
Her comments came a day after 25,000 anti-Islam demonstrators marched in the eastern German city of Dresden to demand stricter immigration rules and an end to multiculturalism.
"What we need to do now is to use all the means at our disposal as a constitutional state to combat intolerance and violence," Merkel said at a conference in Berlin.
Nearly 100,000 people are estimated to have participated in counter-demonstrations against racism in other marches across Germany on Monday. And the Dresden-based movement, called PEGIDA or Patriotic Europeans Against the Islamization of the West, has drawn far fewer supporters in other cities.
But it represents a major political challenge for Merkel.
Her conservative party includes immigration sceptics and members of a surging new right-wing party called the Alternative for Germany (AfD) have allied with PEGIDA.
A recent poll by the Bertelsmann Foundation showed 57 percent of non-Muslim Germans feel threatened by Islam, and it was conducted before deadly attacks by Islamic militants in Paris killed 17 people last week.
Speaking before taking part later on Tuesday in a Berlin vigil organised by Muslim groups for the victims of the Paris attacks, Merkel delivered one of her strongest repudiations of the PEGIDA movement and its sympathizrs.
"To exclude groups of people because of their faith, this isn't worthy of the free state in which we live. It isn't compatible with our essential values. And its humanly reprehensible," Merkel said. "Xenophobia, racism, extremism have no place here. We are fighting to ensure that they don't have a place elsewhere either."
Her comment on Monday that "Islam belongs to Germany," made at a news conference with the visiting Turkish prime minister, was plastered on the front page of many leading newspapers.
It drew criticism from some politicians, including Wolfgang Bosbach, a veteran member of her Christian Democrats (CDU).
"What Islam does she mean? Does this include fundamental Islamist and Salafist currents?," Bosbach told the Saarbruecker Zeitung newspaper. "Germany has a Judeo-Christian, not an Islamic, cultural tradition."
With one of the lowest birth rates in Europe, Germany faces a demographic crisis over the coming decade and Merkel's government is encouraging immigration to combat this.
In 2013, Germany saw net immigration of 437,000 people, mainly from Eastern Europe, its highest level in 20 years. It also welcomed close to 200,000 asylum seekers last year, many from war-torn Syria. Roughly 4 million Muslims live in Germany, most of them of Turkish origin.