The month-on-month drop of 1.8 percent was the second consecutive month of decline, and missed analysts' forecasts.
Analysts polled by financial services firm FactSet had expected a 0.4 percent rebound in August.
Weakness in domestic demand as well as from outside the eurozone had contributed to the August slump, according to the preliminary data released by the federal statistics office Destatis.
German orders were down 2.6 percent, while those from outside the eurozone dropped 3.7 percent.
Growing demand in the eurozone -- with a growth of 2.5 percent -- helped reduce the overall drop.