A Munich court's arrest warrant seeks Demjanjuk's deportation or extradition from the United States.
Demjanjuk, who lives in a Cleveland suburb and was stripped of his U.S. citizenship, denies involvement in the deaths at Sobibor. His family says he has kidney and blood disorders and is too ill to survive a lengthy prosecution in another country.
Sobibor was an extermination camp set up in occupied Poland's Lublin region in 1942. Jews, including Jewish Soviet prisoners of war, and possibly gypsies were transported there by rail and suffocated in gas chambers fed with carbon monoxide released from the exhaust pipes of tanks, historical records show.
U.S. and German authorities allege Demjanjuk worked as a Sobibor Nazi guard in 1943.
If Demjanjuk is transferred to Munich, his case could mark Germany's final major Nazi war-crimes trial, The Washington Post reported.
"We're extremely pleased that the decision was finally made (to issue Demjanjuk's arrest warrant)," Simon Wiesenthal Center Nazi hunter Efraim Zuroff told the newspaper.
"We're talking about someone who was an active participant in mass annihilation."
A U.S. Justice Department spokeswoman declined to comment on the case's next steps but told the Post U.S. officials were "in close contact with our German counterparts on this matter and we will continue to offer our support and assistance."