The Kraftfahrt-Bundesamt said 238,000 vehicles in the country have unauthorised software fitted and has demanded that they are fixed immediately by the auto maker.
German authorities have been cracking down on manufacturers since the Volkswagen Dieselgate scandal first besmirched the reputation of its domestically produced vehicles.
German authorities have also discovered special programming in Daimler cars that they have classified as "inadmissible".
Just two months ago in April, Zetsche said Mercedes-Benz customers are showing more confidence in diesel by continuing to buy them in significant numbers.
This recall follows after Scheuer met Mercedes-Benz chairman, Dieter Zetsche, in Berlin to discuss what has been described as "irregularities in independent test results of various Mercedes-Benz models featuring the German vehicle maker's turbocharged four-cylinder diesel engine". The Mercedes-Benz Vito commercial van, C220d sedan, and GLC220d vehicles sold in Europe are affected by the recall. However, Germany's road vehicle authority, the KBA, has taken issue with the emission control features amid suspicion they allow vehicles to emit excess pollution without detection.
"The federal government will order an immediate official recall because of illegal defeat devices", Scheuer said in a statement. Daimler hasn't contested the existence of the devices, but has argued that the devices may not be illegal.
Daimler Chief Executive Dieter Zetsche said on Monday that the carmaker had found a technical solution for updating the software on its vehicles, and he therefore expected the company would avoid a fine.
'For the existence of the relevant test cycle NEDC, the specific programming in question is not required'.
According to specialist Arndt Ellinghorst, an analyst with Evercore ISI in London, the recall will cost the automaker less than $120 million.
"We don't see any evidence that Daimler was designing software to deliberately cheat on emission testing", he said.
'Overall, this outcome should de-risk the stock'.