Merkel made the remarks in a joint press conference with Chinese Premier Li Keqiang at Beijing's Great Hall of the People, on her seventh visit to China since taking office in 2005.
"If the reports are correct, it would be a serious case," Merkel said.
She added that "it would be for me a clear contradiction as to what I consider to be trusting cooperation between agencies and partners".
Following revelations last year that the US National Security Agency allegedly tapped Merkel's mobile phone, the reports of a German foreign intelligence service employee spying for the US have sparked anger in Berlin.
The US ambassador to Germany was asked to attend a meeting late on Friday at the German foreign ministry, after media reports that a 31-year-old man arrested last week had been feeding information to a US agency for two years.
"I expect now for everyone to assist in the speedy clarification of the accusations, and quick and clear statements, also by the US," German Interior Minister Thomas de Maiziere told Bild newspaper in comments released ahead of Monday's edition.
Germany's federal prosecutor-general confirmed last week that a man had been arrested Wednesday on suspicion of acting for a foreign intelligence service, but did not specify which one.
"All signs indicate that he was acting for the Americans," the Frankfurter Allgemeine Sonntagszeitung (FAS) newspaper quoted an unnamed senior official at Germany's foreign intelligence service, the BND, as saying.
The FAS and the weekly Bild am Sonntag newspaper, which cited information from security officials, said the man had worked for the CIA and had handed over more than 200 documents in return for 25,000 euros ($34,000).