However, the German Chancellor says the quest for improvement has been complicated, including by the jailing of German citizens swept up in Turkey's actions against those accused of involvement in last year's failed coup or terror-related activities.
German Chancellor Angela Merkel wants better ties with Turkey, but says it's a complicated issue.
"I would like to have better ties with Turkey but we have to look at reality... This is a very complicated phase in our relations."
Merkel was speaking in Berlin on Tuesday at a traditional summer press conference.
She called for the release of German citizens swept up in the aftermath of last year's failed coup attempt, calling their imprisonment "unjustified."
Turkey has arrested about 10 Germans and dual nationals in recent months on charges of support for or involvement in the July 2016 attempted coup or terror-related activities.
Mentioning German-Turkish journalist Deniz Yucel and several others by name, Merkel said, "Our demand is very clear: those people who are in prison should be freed."
The arrests have contributed to worsening relations between Berlin and Ankara, which says the arrests are necessary to protect Turkey.
Ankara also accuses Germany of harbouring supporters of the PKK, a terrorist organisation listed by the EU, Turkey and the US, and of sheltering coup plotters who fled the country in the wake of the failed putsch.
German authorities have turned down extradition requests by Ankara to arrest leading FETO figures.
FETO is the acronym Turkey uses for the Fetullah Terrorist Organisation, which Ankara accuses of orchestrating the attempted coup. Its leader, US-based Fetullah Gulen, denies any involvement.
Turkish media report that some 4,000 FETO suspects have gone to Germany from Turkey and other countries in the wake of the failed coup.
Merkel's comments on Turkey came less than a month before national elections in Germany on September 24.
Other issues she addressed included:
"Europe has not yet done its homework — we do not have a functioning Dublin system —that needs to be reformed, and the interior ministers are working on that. And not everyone is willing to ensure a fair distribution of refugees when they arrive in Europe."
Russia & Ukraine conflict
"I am working together with the French President and also with the help of the United States on finding solutions [for the Ukraine crisis] within the Normandy format."
"We just made clear in our joint statement released yesterday that the observance of the ceasefire agreement is of the utmost importance."
"If the Minsk agreement is kept, then the requirement will be met for lifting the sanctions on Russia."
"You've raised the issue of the rule of law in Poland - that's a serious issue because the requirements for cooperation within the European Union are the principles of the rule of law ... We cannot simply hold our tongues and not say anything for the sake of peace and quiet."
"I am not the one who decides on the euro exchange rate."
"Regarding the euro zone, we have very positive data."
"I think that we're in a much better position today than we were a year ago, when I was a lot more worried and I wish Greece every success. I know that it is very, very difficult for many people but I think that Greece will also benefit from more jobs and then gradually from more prosperity."
"I think the suggestion from (Finance Minister) Wolfgang Schaeuble to turn the European Stability Mechanism into a European Monetary Fund is a very good idea and it could make us even more stable and allow us to show the world that we have all the mechanisms in our own portfolio of the euro zone to be able to react well to unexpected situations."