Berlin police launched a preliminary investigation after the Palestinian president Mahmoud Abbas accused Israel of committing “50 Holocausts”.
The remarks were made during a news conference in Berlin alongside German Chancellor Olaf Scholz and sparked outrage.
Abbas had refused to condemn the deadly attack by Palestinian militants on Israeli athletes at the 1972 Munich Olympics.
Instead, Abbas said he could point to “50 Holocausts” by Israel since 1947.
Scholz had said on Twitter that he was "disgusted by the outrageous remarks,” but he was widely criticised for not challenging Abbas’ comments immediately at the press conference and merely grimacing.
Germany's chancellor had earlier rejected Abbas' comment that Israel’s treatment of Palestinians is “apartheid".
"For us Germans, in particular, any relativisation of the singularity of the Holocaust is intolerable and unacceptable," he later wrote on Twitter. "I condemn any attempt to deny the crimes of the Holocaust.”
Berlin has long argued the term "Holocaust" should only be used to describe the Nazis’ mass killing of 6 million Jews before and during World War II.
Police confirmed they received a formal criminal complaint for "inciting hatred" and are investigating.
Germany’s Foreign Ministry said that Abbas would enjoy immunity from prosecution because he was visiting the country in an official capacity, even though the country does not recognise the Palestinian Territories as a sovereign state.
Abbas’s remarks drew strong condemnation from leaders across Israel’s political spectrum. Caretaker Prime Minister Yair Lapid called the comments, “not only a moral disgrace but a monstrous lie”.
Dani Dayan, chairman of the Yad Vashem World Holocaust Remembrance Center, had called Abbas’ statement “appalling” and urged the German government to respond to the “inexcusable behaviour".
In a written statement, the office of President Abbas said that he "reaffirms that the Holocaust is the most heinous crime in modern human history”.
"His answer was not intended to deny the singularity of the Holocaust that occurred in the last century, and condemn it in the strongest terms."
The controversial press conference came just weeks before a planned commemoration of the 50th anniversary of the Munich attack.
In September 1972, members of the Palestinian militant group Black September killed 11 members of the Israeli Olympic team, as well as a German police officer.
Relatives of the victims have said they plan to boycott the ceremony after failing to reach an agreement on compensation from the German government.
The athletes' families have long accused Germany of failing to secure the Olympic Village and botching a rescue operation in which five of the attackers also died.
On Tuesday, Abbas said he was committed to building trust and achieving a peaceful solution to the conflict with Israel.
“Please come to peace,” he said. “Please come to security, let’s build trust between us and you. This is better than other kinds of talking.”