The Germany Defence Ministry plans to recruit nearly 14,300 soldiers over the next seven years, marking the German Army’s first expansion since the Cold War.
The ministry will also increase its budget from €34.2 billion to €39.2 billion by the end of the decade.
According to German Defence Minister Ursula von der Leyen, the proposed plan will help the armed forces react appropriately to new tasks.
Germany is currently involved in 16 foreign missions, including monitoring the migration of refugees across the Mediterranean and supporting NATO allies in the east.
In a statement, Von Der Leyen said: "A quarter century of contraction is over. It is time for the Bundeswehr [Germany Army] to grow again. The Bundeswehr is under pressure to modernise in all areas. We have to get away from the process of permanent shrinking."
In January, the German Parliament’s military ombudsman, Hans-Peter Bartels, revealed that the country’s army is operating with fewer personnel and obsolete equipment.
The army currently employs 87,000 civilian personnel and 177,000 military staff, but is reportedly facing a shortage
of soldiers for a range of multinational operations.
The recruitment will break the cap of 185,000 troops imposed in 2011. The majority of the new soldiers will be trained in modern warfare capabilities, such as cyberwarfare.
Germany has the second-largest armed force in the EU, after France.