Chancellor Angela Merkel's cabinet agreed to allow up to 980 soldiers to serve in the NATO mission, up from 850 previously.
A defence ministry spokesman said the mandate was still restricted to training and support of Afghan forces, and ruled out German soldiers taking part in combat operations or accompanying Afghan troops into battle.
Parliament must still approve the measure.
German forces have been deployed in Afghanistan for 14 years, since US-led forces invaded the country to oust the Taliban in the wake of the September 11, 2001 attacks.
US President Barack Obama has said he would keep US troops in Afghanistan past 2016, when it had been expected that the bulk of its nearly 10,000 soldiers would have been withdrawn.
Germany has indicated it is open to extending the NATO mandate in the country in the wake of recent dramatic Taliban gains, including the brief capture of the strategic northern city of Kunduz.
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