The move follows the arrest of two soldiers suspected of involvement in a plan to attack pro-refugee politicians and blame it on migrants.
German Defence Minister Ursula von der Leyen on Wednesday said she would respond to the discovery of far right sympathisers in the German army with reforms, including revising one of the force's post-Nazi era founding principles.
Two soldiers and one civilian have been arrested over an alleged conspiracy to kill pro-refugee politicians, having created the fake identity of a Syrian refugee.
Germany has taken in more than one million asylum seekers since 2015, many from Syria, Iraq and Afghanistan, amid an initial wave of goodwill followed by an anti-foreigner backlash and a spate of racist hate crimes.
Defence Minister von der Leyen announced a series of reforms for the NATO member's armed forces, including a review of its 1982 "decree on traditions."
The current rules "include many good points but allow for back doors," she said, following revelations that Nazi-era army steel helmets, weapons and pictures were on open display in some army barracks.
Von der Leyen had pledged zero tolerance on all forms of extremism after it emerged the top suspect arrested, Lieutenant Franco Albrecht, 28, had expressed racist views years ago but that superior officers looked the other way out of a "misunderstood esprit de corps."
The minister, under fire over the scandal, also announced changes to reporting chains, disciplinary procedures and the civics education of soldiers, speaking before a hearing by the parliamentary defence committee.
Germany's "Bundeswehr", including the army, navy and air force, has a troop strength of about 180,000 active military personnel, the second largest in the EU after France.