Machinegun-toting police are patrolling German stations and airports after the government raised security levels in response to a tip-off of an attack planned this month.
At a hastily called press conference in Berlin, Interior Minister Thomas de Maiziere told reporters: "From today, there will be a visible police presence. I thought it should be explained to citizens.
"There will also be a variety of measures that will not be visible. There is reason for concern, but no reason for hysteria," he added.
"According to information from a foreign partner which came to us after the Yemen incident, we suspect a planned attack is due to be put into action at the end of November," De Maiziere said.
Last month authorities discovered two US-bound parcel bombs originating from Yemen, one of which went through Cologne airport in western Germany.
Citing security sources, the Tagesspiegel daily said the United States had told Berlin that between two and four al Qa'eda operatives were on their way to Germany and Britain to attempt attacks.
Among the targets Tagesspiegel cited were Germany's popular Christmas markets.
"Since the middle of 2010, the security services have noticed increased indications that the terrorist organisation al Qa'eda has been planning attacks in the United States, in Europe and in Germany," De Maiziere said.
"We now have more details and indications of danger ... It is the unanimous assessment of the security services that we are currently dealing with a new situation."
Announcing heightened security measures "until further notice", De Maiziere said: "These are designed to be preventative and act as a deterrent."
Although the evidence of an increased threat is concrete, "it is not cause and should not be cause for us to change our daily lives totally," added the minister.
Germany, which opposed the 2003 US-led invasion of Iraq but has nearly 5,000 troops in Afghanistan under NATO command, has never experienced an attack by Muslim extremists on its own soil.
But authorities say the Islamist scene is large and dangerous.
The closest it has come to an attack was in July 2006 when Islamic militants placed suitcases with homemade bombs on two regional trains at Cologne's main station. They failed to detonate, averting an almost certain bloodbath.
In addition to beefed-up security throughout Germany, there could also be tighter checks on the external borders of the European Schengen visa-free travel zone, De Maiziere said.
Recent investigations by the Federal Crime Office have "confirmed the continued efforts of Islamist groups to carry out planned attacks in Germany," he added.
"There are also concrete indications in this case," he said.
In October, De Maiziere warned against "alarmism" about the threat of terrorist attacks, after the United States, Britain and Japan issued a travel alert for Europe.
This earned him criticism in some quarters for downplaying the threat and being insufficiently tough on terror.
After the terror warning, Chancellor Angela Merkel's spokesman Steffen Seibert told a regular press conference there were no plans to change her schedule.
"We would be making a big mistake as a society if we allowed our free and democratic way of life to be impaired in any way," said Seibert.
"That would be giving the terrorists a cheap victory."
Also on Wednesday, accountancy firm PwC released a report saying German air freight companies expected higher costs as a result of tighter security measures in the wake of recent alarms.