German federal prosecutor Harald Range will investigate allegations by Edward Snowden that the US government bugged Chancellor Angela Merkel’s phone.
Harald Range told the German parliament’s legal affairs committee that an investigation would be held against “unknown” persons.
Angela Merkel has publicly asked for an explanation for the alleged spying by the NSA.
The inquiry was announced as President Barack Obama visited Europe.
“Sufficient factual evidence exists that unknown members of the US intelligence services spied on the mobile phone of Chancellor Angela Merkel,” Harald Range said on Wednesday.
At the same time, he said he had decided against opening an investigation into claims of wider NSA surveillance of German citizens, AFP news agency reports.
Pressure for a wide-ranging investigation had been growing, correspondents say.
Angela Merkel and Barack Obama are due to meet in Brussels at a G7 summit on Wednesday.
Barack Obama told Angela Merkel last month that he was “pained” that Edward Snowden’s disclosures had strained the US-German relationship.
He said he had directed US intelligence agencies to weigh the privacy interests of non-Americans as well as US citizens and residents, “in everything that they do”.
Angela Merkel has proposed establishing a European communications network to avoid emails and other data automatically passing through the US.
On Wednesday, Angela Merkel’s spokesman Steffen Seibert said he would not “evaluate” or comment on the prosecutor’s decision.
“The government didn’t exert any influence on the prosecutor,” he said in quotes carried by AP news agency.
Meanwhile, US deputy national security adviser Ben Rhodes told reporters he believed dialogue between the two allies would be more effective than an investigation.
“We believe we have an open line and good communication [with Germany],” he said.
Some German lawmakers have also called for Edward Snowden to be invited to Berlin to testify in parliamentary inquiry into NSA surveillance.
However, German government has opposed this, fearing it would damage bilateral ties.
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