Chancellor Angela Merkel's coalition government imposed restrictions on arms sales to Saudi Arabia last year due to Riyadh's role in Yemen war and the killing of Saudi journalist Jamal Khashoggi.
The German government said on Thursday it would extend for a further six months a ban on exporting arms to Saudi Arabia which has strained ties with fellow European arms exporters with whom German companies have joint programmes.
"The ban will be extended for a further six months to September 30," read an e-mailed statement by government spokesman Steffen Seibert.
"Over this period no new export applications will be approved."
The ban has been criticised by European allies since it put a question mark over billions of euros of military orders, including a 10 billion pound ($13.27 billion) deal to sell 48 Eurofighter Typhoon jets to Riyadh that would be led by Britain's BAE Systems.
The government further sharpened its tone following the killing of Saudi journalist Jamal Khashoggi in October at the Saudi consulate in Istanbul and halted all arms exports to the country, including deliveries under an already approved arms deal.
The freeze has pitted Chancellor Angela Merkel's conservatives against their Social Democrat coalition partners, who are keen to woo traditional voters sceptical about arms sales and worried about Saudi involvement in Yemen's war.
But in an attempt to assuage French and British partners' concerns, the government also agreed to extend for nine months export licences that had already been granted, provided the companies undertook not to deliver any finished weapon systems until the end of the year.
This provision frees companies of the obligation to enter the costly and time-consuming process of applying for a new licence.
The government also called on France and Britain to ensure that any weapons systems delivered to Saudi Arabia or the United Arab Emirates would not be deployed in the Yemen conflict.
The government also said it would find ways of helping the privately-owned Peene shipyard in Germany, which has been prevented by the export ban from completing and delivering coastguard ships it has built for Saudi Arabia.
Among the options was for Germany to buy the vessels.