Merkel said a "really good compromise" on immigration had been reached.

It meant that Seehofer was able to hail tighter immigration controls, while Merkel was able to say that Germany adhered to EU rules and was committed to the principles of freedom movement within the bloc. It comes as EU leaders reached a deal on the continent's approach to the migrant crisis last week.

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"The spirit of partnership in the European Union is preserved and at the same time an important step to order [has been taken]", Merkel told reporters.

Seehofer was the premier of Bavaria when his state became the main gateway into Germany for migrants in 2015. He wanted Germany to block migrants at the border if they have no papers or have already registered in another European country.

Merkel's CDU relies on the CSU to maintain power through a coalition, which also includes the centre-left Social Democrats.

The CSU faces a strong challenge from the far-right Alternative for Germany in October's regional election.

Even if the immigration dispute has now been settled, it leaves Seehofer, who has gone back on a threat to resign, diminished, experts said. The dispute, and Monday's compromise, are also a sign that the authority of Merkel, once Europe's most powerful leader, is waning after 12-1/2 years in office.

Reuters