The authority said it suspected the emissions control devices were being used in the bulk of Daimler's new Euro 6 diesel vehicle fleet, insisting that the devices were in breach of current regulations.
The company said it is co-operating with authorities.
Mercedes-Benz is caught up in an emissions scandal of its own. "An immediate formal recall because of prohibited shutoff devices" is required for the Mercedes-Benz GLC and C-Class models, which join the already recalled Vito van.
German recall affects 220d versions of C-class and GLC, as well as some Vito vans.
Following a second meeting between Daimler CEO Dieter Zetsche and German Transport Minister Andreas Scheuer in Berlin on Monday, the government said it would issue an official order to make the carmaker withdraw a total of 238,000 cars in Germany alone. A Daimler spokesperson told German language newspaper Bild am Sonntag, who first reported the story, that the automaker was "cooperating to a full extent and transparently with the KBA and the federal transport ministry".
Brad's forecast | Severe storms possible Monday afternoon
Beyond Wednesday , rain chances become minimal as high temperatures creep back into the 90s for the second half of the week. We're pretty much picking up right where we left off this weekend as dry weather prevails to kick off this work week.
Six Mercedes-Benz models appeared in environmental lobby group Transport and Environment's 2016 "Dirty 50" list of diesel cars and SUVs, with the finger pointed at both thermal switches and another hot-restart software loophole.
"Daimler says the applications in the motor control software the federal government has found fault with will be removed at the greatest possible speed and in cooperative transparency with the authorities", Scheuer said. It also said the legality of the software would still need to be clarified. AdBlue is an additive injected into the Selective Catalytic Reduction (SCR) filter to reduce emissions.
The so-called "thermal switch" is set at a particular temperature.
Modern diesel vehicles use an injection system to pump a fluid known commonly as AdBlue (comprised of one-third part urea and two-thirds part deionized water) into the exhaust stream of diesel vehicles.
It's all remarkably similar to the Volkswagen diesel-emissions scandal uncovered in September 2015, albeit on a much smaller scale.