The ministry added the new text would "remove the legal uncertainty created by the judgement of the regional court in Cologne."
While considering a case brought against a doctor who had circumcised a Muslim boy, the court in the western German city ruled that the rite was tantamount to grievous bodily harm.
The decision united Jewish and Muslim groups in opposition and caused outrage from religious and political leaders in Israel and Muslim countries.
Diplomats admitted that the ruling proved "disastrous" for Germany's international image, particularly in light of its Nazi past.
Merkel was reported to have warned that Germany risked becoming a "laughing stock" if it banned circumcision.
The new bill stipulates certain provisos for a boy to be circumcised.
Among these conditions, the draft law stipulates the practice must be carried out "professionally" and "with the most effective pain relief".
An exception must also be made in individual cases if there are health risks, for example if the infant is suspected of being a haemophiliac.
Germany is home to about four million Muslims and more than 200,000 Jews.
Source: AFP
