Merkel also called on the demonstrators and the Chinese government to curb the violence in the Himalayan territory, Deutsche Welle reported.
The Chinese government has deployed troops and tanks to Lhasa, demanding that Tibetan rioters surrender to police.
"A lasting solution to the Tibet question can perhaps only be found through a peaceful and direct dialogue between the Chinese government and the Dalai Lama," the chancellor's spokesman, Ulrich Wilhelm, said in a statement.
The Nobel Prize-winning Tibetan spiritual leader, who lives in exile in India, maintains close ties with Merkel, her spokeswoman said.
The Chinese government views the Dalai Lama as a separatist. Last year, Beijing canceled high-level meetings with German officials after Merkel became the first German chancellor to meet with the Dalai Lama.