Red Bull's Vettel, the three-time defending F1 world champion, grabbed the advantage from pole-sitter Lewis Hamilton on the first lap and didn't surrender it en route to his 30th career triumph.
Raikkonen and his Lotus teammate Romain Grosjean mounted a late challenge but Vettel hung on and finished 1 second ahead of Raikkonen, claiming his first German GP in his seventh try.
With the result, Vettel moved to within one victory of Nigel Mansell for fifth on the F1 all-time grand prix winners list and boosted his lead in the championship standings to 34 points over Fernando Alonso.
Grosjean settled for third place while Ferrari's Alonso and Mercedes' Hamilton rounded out the Top 5.
A cameraman was transported to a hospital after a being struck by a tire that came off the car of Mark Webber as it was leaving the pit area.
The photographer walked away under his own power was but hospitalized for further observation, race officials said.