Schleswig Holstein's data protection commissioner Thilo Weichert has ordered state institutions to shut down fan pages on the social networking site and remove the button from their websites, saying it leads to illegal profiling.
Weichert says analysis by his office shows Facebook builds personal profiles on users and non-users that infringe upon German and European data protection laws.
He also urged Internet users in general to "keep their fingers from clicking on social plug-ins" and "not set up a Facebook account" to avoid being profiled.
The keepers of Germany's strict privacy laws have repeatedly clashed with international Internet giants, such as Facebook and Google.
Facebook did not immediately respond to an emailed request for comment.