The Clinton Foundation allegedly received around $5 million from Germany's Ministry for Environment between July and September 2016 before presidential elections in the U.S., reports said on Tuesday.
The ministry has denied allegations claiming that the donation was linked to support for Clinton's campaign in the presidential elections.
Barbara Hendricks, the Minister's spokeswoman confirmed the donation and said that they had a "very positive experience" with the Clinton Foundation and the millions of dollars diverted to the Clintons were going to be used for planting trees in African countries.
Hendricks said "This is a project that is carried out directly by the Clinton Foundation in Kenya and Ethiopia with German co-financing."
It is unclear if the Merkel government made further payments to the Clinton charity through other ministries or state-run agencies.
It has also been claimed that the foundation's donors list shows the Federal Ministry of the Environment making the transaction.
Concerns rose in Germany and the U.S. after it was revealed that German taxpayers handed over millions in the third quarter of the year, during the period Clinton was running for president.
Clinton had said on board her plane: "One of my favorites is Angela Merkel because I think she's been an extraordinary, strong leader during difficult times in Europe, which has obvious implications for the rest of the world and, most particularly, our country.
German politician Vera Lengsfeld, of Angela Merkel's Christian Democratic Union Party (CDU), said there are serious questions to answer.
Lengsfeld wrote in her blog: "Why does a federal ministry support the election campaign of an American presidential candidate?
"Apparently German taxpayers had to finance Hillary Clinton's election campaign without knowing it."