The teacher, who wasn't identified, taught German at a school in Molin in the state of Schleswig-Holstein for four years, The Local.gr reported Tuesday.
A new headmaster at the school instigated an investigation of her after he noticed discrepancies between her purported qualifications and her teaching competence, the education minister said.
Officials said the woman had studied German and civics while growing up in the former East Germany. About the time the two Germanys were reunified, they said she created a fake teaching diploma that allowed her to get a job in Berlin as a state teacher.
She was transferred to Molin in 2008 and stopped working at the school in February.
Schleswig-Holstein officials have stripped her of her civil service job and ordered her to pay back her salary.
Her former students will be allowed to have their work rechecked by a qualified teacher, the ministry spokesman said.