Von der Leyen was nominated for that job by EU leaders earlier this month.
"I'd like to say that I respect this decision and it makes clear that Ursula von der Leyen has decided on a new stage of her life," Merkel said after von der Leyen tweeted that she would resign as defence minister.
Merkel added that everything else remained to be seen - referring both to the knife-edge vote in the European Parliament and who would succeed von der Leyen as defence minister.