Her spokesman said Merkel had raised the issue in a telephone call with Trump yesterday, reminding him of obligations under international human rights law.
"The chancellor regrets the entry ban imposed by the US government against refugees and nationals from certain countries," spokesman Steffen Seibert said in a statement.
"She is convinced that even in the necessarily resolute battle against terrorism it is not justified to place people from a certain origin or belief under general suspicion."
Trump has caused consternation at home and abroad after signing a sweeping executive order on Friday suspending refugee arrivals and barring visas for travellers from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen for the next three months.
A federal US judge on Saturday blocked part of the ban, ordering authorities to stop deporting refugees and other travellers stuck at US airports.
Merkel's condemnation comes a day after she spoke by phone with the new US president, when they discussed a range of issues from relations with Russia to the situation in the Middle East and NATO.
"The Geneva Refugee Convention calls on the international community to take in war refugees on humanitarian grounds," he said.
"The chancellor stressed this policy in yesterday's phone call with the US president."
In an interview with European media earlier this month, Trump said Merkel had made a "catastrophic mistake" in allowing a record number of migrants into Germany.
More than a million people, including hundreds of thousands from war-torn Syria, have arrived in Germany since the chancellor opened the country's doors to those fleeing conflict and persecution in 2015.
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