Merkel said in a speech in parliament that German troops will try to start handing over some responsibility to Afghan authorities in 2011, but added the country's 4,500 soldiers in Afghanistan will stay as long as necessary.
She said the conflict is "what is commonly known as warfare or war" — a word she has so far avoided using.
"Each member of this house ... has known that," Merkel said. "We cannot ask our soldiers to be brave if we lack the courage to acknowledge what we have decided."
Public support for the German mission, which started after the Sept. 11, 2001, terrorist attacks, has eroded over recent months in the face of a rising death toll and the killing of Afghan civilians. A recent poll showed about 62 percent of those asked want German troops to come home.
Seven soldiers have been killed this month alone, bringing the overall death toll to 43 since the mission began. In addition, the German public was particularly upset at a Sept. 4, 2009, NATO air attack on two fuel trucks near the northern Afghan town of Kunduz that killed up to 142 people, many of them civilians. The attack was ordered by a German commander.
Defense Minister Karl-Theodor zu Guttenberg stressed in a parliamentary hearing Thursday that the attack should not have happened.
The danger at the time did not warrant bombing of the trucks and the surrounding people, Guttenberg said, adding that the German military "does not accept civilian victims lightly."
Germany's opposition Left Party has been one of the strongest opponents of the mission, lobbying for an immediate retreat.
"Those who demand to end the war now want to save the lives and well-being of everyone involved," Left Party politician Gregor Gysi said in Thursday's debate.
Merkel, who faces an important regional election May 9, rebuffed that, saying those demanding an immediate pullout were acting irresponsibly.
Apart from Afghan security, Merkel insisted what is at stake is the security of Germany, Europe, and partners worldwide. She pointed to current and future nuclear powers surrounding Afghanistan.
"If we were to leave Afghanistan without a plan, that would immensely increase the danger that nuclear material could end up in the hands of extremist groups," she said.
She added, "It is important that we as politicians and members of parliament admit to human doubts that all of us have had — doubts whether this fight in Afghanistan is really indispensable. Nonetheless, I and the vast majority of this house stand behind this mission."
Speakers for the government parties and for the largest opposition party, the Social Democrats, supported Merkel's stance.
Social Democratic leader Sigmar Gabriel said his party also thinks the Afghan military mission is still necessary, although he added that "obviously we are not convincing the Germans at this point."
Gabriel pointed out that since World War II, Germany has developed a "truly civil society and I say that has to stay that way."
In the 20 years since reunification, Germany's military, know as the Bundeswehr, has slowly returned to the world stage, taking part in several international peacekeeping missions. But Germans remain uncomfortable with the idea of their troops fighting a war.
The Sept. 4 attack near Kunduz was "the gravest incidence in the history of the Bundeswehr," Defense Minister Guttenberg said at the hearing, responding to questions about his handling of the incident.
Guttenberg, who came into office roughly two months after the attack, had originally called it adequate in a military sense, but later changed his mind. He said Thursday his original assessment was based on incomplete information by advisers in his first week in office.
He said they had not informed him about a secret report by German military police that had raised critical questions immediately after the attack.