Merkel proposed a deal with the Organisation for Security and Cooperation in Europe (OSCE) monitoring the 2,000km long border, adding the need for ceasefire agreement by both sides.
"We need a two-sided ceasefire linked to a clear controlling of the Russian-Ukrainian border, otherwise peace won't be achieved," Merkel said.
Ahead of a much-anticipated meeting on Tuesday between the presidents of Russia and Ukraine, Merkel expressed hope for a peaceful solution to the conflict that has claimed more than 2,000 lives.
"The plans are on the table... now actions must follow," she said.
Ukrainian President Petro Poroshenko, whose forces have been forcing the rebels to retreat, said Kiev had offered ceasefires before and they were flouted. He said no peace deal was worth sacrificing Ukraine's territorial integrity, and placed the blame at Russia's door.
"Ukraine is ready and capable of guaranteeing a peaceful settlement," Poroshenko said. "What is stopping us are the foreign mercenaries. Take the people with guns out of our territory....and peace in Ukraine will be quickly restored."
Fighting persists, but Ukraine football in the balance
Ukraine has retaken control of much of its eastern territory bordering Russia in the last few weeks, but fierce fighting for the rebel-held cities of Donetsk and Luhansk persists. In Ukraine's Donetsk, the largest city under rebel control, residents reported artillery strikes throughout Friday night and Saturday. The stadium of Ukrainian football champions, Shakhtar Donetsk, was damaged by shelling on Saturday. The club said two shells struck the Dunbass arena early in the morning, one damaging the arena itself and another striking its electricity substation. The 52,667-capacity Dunbass Arena was a venue for the 2012 European championship in Poland and Ukraine and has hosted teams including Manchester United and Barcelona for Champions League games. Shakhtar has moved its home and Champions League games to the western city of Lviv due to the conflict.
Unrest in eastern Ukraine has forced more than 340,000 people to flee their homes.