Merkel made her remarks in Berlin following talks with visiting U.S. Secretary of State Condoleezza Rice.
After her talks in Berlin, Rice flew to the Romanian capital Bucharest to sign an agreement on the opening of U.S. military bases in Romania. From Bucharest, Rice is scheduled to go to Ukraine late on 6 December.
Merkel said that Khaled al-Masri was seized by U.S. operatives in Macedonia in 2003, and was transported to Afghanistan for interrogation on suspicion of being a terrorist. He claims he was shackled, beaten, and injected with drugs during interrogations.
Al-Masri, who now lives in Germany, filed a suit on 6 December against the U.S. Central Intelligence Agency for abduction, imprisonment, and mistreatment.
Earlier, Rice said the United States "does not condone torture." She acknowledged that the United States has flown terrorist suspects abroad for interrogation, but denied they have ever been tortured in U.S. custody or knowingly transferred to other countries to be tortured.