There was a very tense atmosphere at the German GP with Michael Schumacher's fans attacking several Williams team vehicles because of the controversy at Silverstone. Further new rules had been introduced, notably a reduction in the size of the rear wing and the introduction of the wooden "stepped flat bottoms". These are planks of special hard wood which are fitted under the cars. They must show no significant wear at the end of the race as this would indicate that the car was running illegally low. The lower the car, the greater the aerodynamic advantage for better speed and cornering. This meant that the cars were sliding more than before. The big news however was an announcement by the FIA that it had found irregularities in the Benetton software at Imola. The team immediately declared its innocence.

Qualifying resulted in a Ferrari 1-2 with Gerhard Berger ahead of Jean Alési. It was the first Ferrari pole position for four years. Damon Hill was third in his Williams-Renault with Schumacher only fourth and obviously struggling, with his car sliding a lot more than previously. Ukyo Katayama took fifth in his Tyrrell-Yamaha ahead of David Coulthard's Williams and Ukyo's team mate Mark Blundell. Mika Häkkinen was eighth for McLaren, the Finn having set the time in Martin Brundle's car after he had crashed his own. Heinz-Harald Frentzen was ninth in his Sauber while the two Jordan-Harts were 10th and 11th, Eddie Irvine beating Rubens Barrichello.

At the start Berger took the lead from Alési and a fast-starting Katayama. Behind there was chaos. Before the field even got to the first corner Andrea de Cesaris (Sauber) and a fast-starting Alex Zanardi (Lotus) collided in the midfield. The cars then took out the two Minardis of Pierluigi Martini and Michele Alboreto. As the field dived into the first turn Häkkinen and Blundell were on either side of Coulthard. The Scotsman was squeezed and had nowhere to go and so he hit Häkkinen and the McLaren-Peugeot spun in front of the pack while Blundell braked hard and was hit from behind by Irvine, punted into a spin and was then hit by Frentzen before bouncing back into Irvine again. Häkkinen, Blundell, Frentzen and Irvine all slid into the gravel trap, leaving Barrichello with no choice but to join them. Further back Johnny Herbert (Lotus) slowed when he saw what was happening ahead and he was then hit by Martin Brundle's McLaren. This spun Brundle across the road but he missed being hit by any other cars.

A few metres up the road from the carnage Alési slowed with an engine failure. As the leaders braked for the first chicane Schumacher squeezed past Katayama to take second place. Hill was fourth and Coulthard, with his front wing knocked out of place, was fifth. At the third chicane Hill challenged Katayama for third. The two collided and both damaged their suspensions. The result at the end of the first lap was Berger leading Schumacher with a gap back to Katayama and Olivier Panis's Ligier. Only 13 cars cars were still running. On the second lap fifth-placed Verstappen was overtaken by Éric Bernard's Ligier and four laps later Katayama disappeared with a sticking throttle whih caused him to have two spins on the same lap. This promoted Panis to third and Bernard to fourth.

The Benettons pitted early and on lap 15 there was a spectacular fire in the pit when Verstappen's refuelling went wrong. Five mechanics and Verstappen all suffered minor burns. Four laps later Benetton's weekend ended when Michael Schumacher's engine failed. This promoted Panis to second and Bernard to third. Berger continued to lead and the order remained unchanged for the rest of the afternoon with Christian Fittipaldi finishing fourth in his Arrows ahead of team mate Gianni Morbidelli with Érik Comas's Larrousse sixth.