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Horst Seehofer yesterday urged Merkel to take a firmer stance on migration during her latest attack on the German Chancellor.
In a shock warning, he said voters were likely to turn to the far right parties if the government did not seem to tackle the problem.
The right alternative for Germany (AfD) has repeatedly opposed Merkel's open-door immigration policy introduced in 2015.
Mr Seehofer said: "The issue of migration is the mother of all the political problems in this country, which I have been saying for three years.
"This is confirmed by many surveys – many people now associate their social concerns with the problem of migration."
But Angela Merkel dismissed her frank remarks, telling the RTL television channel: "I say it differently.
"Migration presents us with challenges and here we have problems but also successes."
Mr Seehofer also expressed his anger at the deadly stab of a man in eastern Germany last month allegedly committed by two migrants.
A Syrian and an Iraqi were arrested following the attack on the 35-year-old man in Chemnitz on August 26th.
The killing has revived a fierce line on Germany's immigration policy, with far-right activists organizing several anti-migrant protests.
Mr Seehofer claimed that he would have joined the markets if he was not a member of Ms Merkel's cabinet.
The politician said: "People are upset and outraged by these killings and I understand it.
"If I had not been a minister, I would have taken the street as a citizen, but of course not with the radicals."
Some far-right members were seen doing Nazi salutes during demonstrations in Chemnitz.
But Mr Seehofer said: "I understand it when people protest, but that does not make them Nazis.
Earlier this week, AfD leader Alexander Gauland called for a "peaceful revolution" against Merkel's liberal immigration policy.
