As the entry for the Grand Prix was rather small the organizers at the Nürburgring decided to run Formula 2 cars alongside the F1 machinery, although the races were treated as separate events. Ferrari entered three cars for Lorenzo Bandini, Mike Parkes and Ludovico Scarfiotti (this being an older V8 car) while there were few other changes with Lotus and BRM continuing with old engines rather than the BRM H16. The Formula 2 cars were headed by rising stars Jacky Ickx and Jean-Pierre Beltoise in their Matras. Guy Ligier's adventures with a private Cooper-Maserati ended with an accident in practice, the Frenchman suffering a broken leg when he lost control and was thrown from his car during practice on Friday.

Clark took pole position with a brilliant showing, while John Surtees (Cooper-Maserati), Jackie Stewart (BRM) and Scarfiotti shared the front row on the 4-3-4 grid. Jack Brabham was ahead of Bandini and Parkes on the second row with Dan Gurney's Eagle-Climax, Jochen Rindt's Cooper, Graham Hill's BRM and the similar car of privateer Bob Bondurant on the third row.

The conditions were overcast for the race with the track damp and while Surtees took the lead from Brabham and Bandini there was a serious accident at Quiddelbacher-Hohe when John Taylor's private Brabham-BRM collided with Ickx's Matra. Both cars spun off, Taylor's bursting into flames. The Leicester driver suffered serious burns from which he died a month later in hospital in Coblenz.

By the end of the first lap Brabham had taken the lead from Surtees with Rindt getting ahead of Bandini to take third place. Clark, Gurney and Stewart were also soon ahead of the Ferrari driver. Hill also overtook Bandini and he was then able to pass his team mate and Clark, who had dropped behind Gurney. Hulme then moved through the midfield and was squaring up to pass Gurney when he ran into ignition troubles and dropped back to retire. On lap 13 Clark made a rare mistake and crashed. This left Brabham, Surtees and Rindt unchallenged at the front. On the last lap Gurney suffered engine problems and was overtaken by Hill, Stewart and Bandini. Beltoise won the Formula 2 race, finishing eighth overall on the road.