Germany is to investigate allegations by US intelligence leaker Edward Snowden that the US government bugged Chancellor Angela Merkel's phone.
Federal prosecutor Harald Range told the German parliament's legal affairs committee that an investigation would be held against "unknown" persons.
Ms Merkel has publicly asked for an explanation for the alleged spying by the US National Security Agency (NSA).
The inquiry was announced as US President Barack Obama visited Europe.
"Sufficient factual evidence exists that unknown members of the US intelligence services spied on the mobile phone of Chancellor Angela Merkel," Mr Range said on Wednesday.
At the same time, he said he had decided against opening an investigation into claims of wider NSA surveillance of German citizens, AFP news agency reports.
Pressure for a wide-ranging investigation had been growing, correspondents say.
The German and US leaders are due to meet in Brussels at a G7 summit on Wednesday.
Mr Obama told the German chancellor last month that he was "pained" that Mr Snowden's disclosures had strained the US-German relationship.
The US leader said he had directed US intelligence agencies to weigh the privacy interests of non-Americans as well as US citizens and residents, "in everything that they do".
Ms Merkel has proposed establishing a European communications network to avoid emails and other data automatically passing through the US.
On Wednesday, Ms Merkel's spokesman Steffen Seibert said he would not "evaluate" or comment on the prosecutor's decision.
"The government didn't exert any influence on the prosecutor," he said in quotes carried by AP news agency.
Meanwhile, the US deputy national security adviser, Ben Rhodes, told reporters he believed dialogue between the two allies would be more effective than an investigation.
"We believe we have an open line and good communication [with Germany]," he said.
Some German lawmakers have also called for Mr Snowden to be invited to Berlin to testify in parliamentary inquiry into NSA surveillance.
However, the government has opposed this, fearing it would damage bilateral ties.