After months of feverish speculation, Merkel said at a meeting of her conservative Christian Democrats (CDU) that she would run for a fourth term, party sources told AFP.
Merkel, 62, has governed Europe's top economic power, which does not have term limits, since 2005.
Another full four-year mandate, which pollsters say is likely, would tie the post-war record set by her mentor Helmut Kohl, who presided over the 1989 fall of the Berlin Wall.
Merkel represents "stability and reliability in turbulent times because she holds society together and stands up to over-simplification" by populists, CDU deputy leader Julia Kloeckner told Welt am Sonntag newspaper.
"She stands for moderation and centrism instead of cheap headlines."
A pastor's daughter who grew up in communist East Germany, Merkel is popular among Germans who see her as a straight-shooter and a safe pair of hands in a crisis.
But her decision to let in more than one million asylum seekers over the last two years dented her support.
Nevertheless, observers said the recent seismic shifts in global politics were likely to drive traditionally risk-averse German voters back into her arms.
"Society's need for predictability and stability could become so overpowering in the 2017 election year that even the creeping erosion of Merkel's chancellorship won't compromise her success at the polls in the end," left-leaning news weekly Die Zeit said.
More than half of the electorate -- 55 per cent -- want Merkel to stay in office, up from 42 per cent in August, a poll for Bild am Sonntag newspaper showed today.
While the globe braces for potentially radical changes in US leadership under Trump, Britain is wrestling with the fallout from its June vote backing withdrawal from the EU, and France is facing a presidential poll in May that could see far-right candidate Marine Le Pen snatch victory.
Underlining her relative strength, Merkel gathered Obama and the leaders of Britain, France, Spain and Italy at her chancellery Friday for talks on the fight against terrorism, climate change and the strategic threat posed by Russia.
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