Once again the German GP organizers decided to run Formula 1 and Formula 2 cars together in the German GP and so the field was increased to 26 cars, although Troy Ruttman's Maserati did not have an engine for the race and was withdrawn. The Formula 2 contingent included future star Bruce McLaren, who was making his F1 debut while Phil Hill made his first appearance in a Ferrari - albeit an F2 Ferrari Dino 156.

Mike Hawthorn set the fastest practice time and had Vanwall drivers Tony Brooks and Stirling Moss and his team mate Peter Collins alongside him on the front row of the 4-3-4 grid. Wolfgang von Trips (Ferrari) shared the second row with the Coopers of Roy Salvadori and Maurice Trintignant (a Rob Walker entry) while the third row featured the BRMs of Harry Schell, Jean Behra, Phil Hill's F2 Ferrari and Ian Burgess in the High Efficiency Motors F2 Cooper.

Moss took the lead with Brooks behind him but the second Vanwall driver was overtaken by Hawthorn and Collins during the first lap. On the fourth lap Moss suffered a broken magneto and was out, leaving the Ferrari drivers 1-2 with a big gap back to Brooks. Collins had moved ahead of Hawthorn and so Hawthorn was Brooks's first target when he caught the Ferraris on the ninth lap. He battled with Hawthorn before getting ahead at the start of the 11th lap. Brooks also made it past Collins and began to pull away. Collins tried to keep up and at Pflanzgarten the Ferrari went wide, hooked a wheel in a ditch, and somersaulted. Collins was thrown out into a tree and suffered severe head injuries. He was flown by helicopter to Bonn where he died in hospital.

Hawthorn narrowly avoided being involved in the crash but within a few minutes had retired with a clutch failure. Brooks was left with an enormous lead over Salvadori. Trintignant was third with von Trips fourth and McLaren fifth, the winner of the F2 class.