German intelligence agency BfV said in its annual report that the PKK managed to double its revenues from donations in Germany within the last 10 years.
A German spy agency has said that the PKK collects €25 million (more than $28 million) every year in donations from across Europe.
PKK is recognised as a terrorist organisation by the European Union, the US and Turkey.
The group has collected more than €13 million (over $14 million) in Germany alone between September 2015 and early 2016, said the Federal Office for the Protection of the Constitution (BfV) in its annual report on Tuesday.
"The PKK managed to double its revenues from donations in Germany within the last 10 years," the report said.
The report said the group had nearly 14,000 followers in Germany and had recently increased its recruitment activities, sending dozens to camps in northern Iraq.
Source of friction between Turkey and Germany
Germany outlawed the PKK in 1993, but the country's authorities have been reluctant to take strong measures against the funding, propaganda and recruitment activities of the group, despite repeated warnings from Turkey.
Berlin's reluctance in putting a check on PKK activities in the country has been the source of major friction between Turkey and Germany.
BfV's annual report also warned that PKK followers may again employ violence in Germany.
"Though largely peaceful events prevail in Europe, violence remains an option of the PKK ideology," the report said.
"The PKK continues to be able and prepared, if necessary, to use violence in Germany at least in isolated cases or to tolerate acts of violence carried out by its young adherents."
Germany admits failure
Germany's Foreign Minister Sigmar Gabriel on Friday admitted Berlin's failures in combating propaganda activities of the PKK in the European country.
"I think Turkey is right when it warns us and says we should not allow the PKK to carry out propaganda activities in public," Gabriel told reporters in a news conference.
"I also think that it is unacceptable to ban public appearances of Turkish politicians, but at the same time (we) allow posters of Mr. Ocalan," he said, referring to rallies of PKK followers in Germany, in which they use flags of PKK and its imprisoned leader, Abdullah Ocalan.
The PKK resumed its armed campaign against Turkey in July 2015 and since then has been responsible for the deaths of close of 1,200 people including security personnel and civilians.