Arguably, German literature holds less than its deserved status in world literature in part because the lyrical qualities of its poetry and the nuances of its prose defy translation. Even the most sublime figures in German literary history—Goethe (the author of Faust), whose genius not only created poetry, novels, and drama but extended to scientific study as well, and his friend Friedrich Schiller, poet, dramatist, and literary theorist—are doomed to remain known to the world outside the German-speaking regions largely by reputation. The same is true for a host of remarkable writers through all periods of German literary history, including Friedrich Hölderlin, whose lyric poetry, heavily influenced by the Greek and Latin classics, invigorated early modern German writing; Hermann Broch, whose Der Tod des Vergil (1945; The Death of Virgil) is a profound meditation on the collapse of the spirit in the scientific age; Ernst Jünger, whose futuristic novel Auf den Marmorklippen (1939; On the Marble Cliffs) is an allegorical critique of Nazism; and even Karl May, perhaps the most popular of all German writers, who in the late 19th century wrote a succession of best-selling westerns after serving a prison sentence for fraud.

Four German poets and writers from the early 20th century won permanent niches in world literature: Franz Kafka, whose fantastical works explored the dark side of modernism; Thomas Mann, who explored the psychology of the modern condition in his novels; Rainer Maria Rilke, who developed a new style of lyric poetry influenced by the work of the French Symbolists; and Bertolt Brecht, known for his brilliant Marxist dramas. Four other German novelists became Nobel laureates while winning a popular following abroad in translation: Hermann Hesse, who celebrated Eastern mysticism; Heinrich Böll and Günter Grass, who explored the effects of World War II on German lives and psyches; and Herta Müller, who reflected on the oppressive atmopshere of her native Romania during the dictatorship of Nicolae Ceaușescu. Among other writers who gained widespread recognition in the late 20th and early 21st centuries were Siegfried Lenz, Peter Weiss, Uwe Johnson, Hans Magnus Enzensberger, Patrick Süskind, Peter Handke, Gabriele Wohmann, and W.G. Sebald. During partition many writers fled East Germany, some after serving prison terms; the poet and songwriter Wolf Biermann was exiled in 1976 while on tour in West Germany. Among those of international significance who remained in East Germany were Stefan Heym, Anna Seghers, and Christa Wolf.

The German theatre has long been faced with the dilemma of either being bold and innovative or relying on the rich repertoire of German classics from the 18th and 19th centuries, a limited number of established 20th-century dramas from artists such as Brecht, Carl Zuckmayer, or Max Frisch, and contemporary plays in translation from Britain, France, and the United States. While the system of public subsidies and ticket subscriptions favours a steady diet of Goethe, Schiller, Gotthold Ephraim Lessing, William Shakespeare, George Bernard Shaw, Jean Anouilh, Anton Chekhov, and Brecht, it also allows for risks and for the plays of late 20th-century dramatists such as Martin Walser and Patrick Süskind to be performed. Small experimental theatres enjoy a lively, if hazardous, existence in the major cities and often closely resemble Germany’s still vibrant political cabaret.

In East Germany all theatres were state-owned. The German Theatre (Deutsches Theater) in Berlin reopened in September 1945 and was the first German theatre to perform following the Nazi collapse. The old German National Theatre (Deutsches Nationaltheater) in Weimar was the first to be rebuilt after 1945. Understandably, Berlin dominated theatrical developments, especially because of the work of Brecht at the Theater am Schiffbauerdamm. Given a haven in East Germany—a theatre and a company, along with the political and artistic latitude he required—Brecht was able to produce and perform his own works exclusively. Nevertheless, the Berliner Ensemble, as his group was named, possibly commanded more critical and popular attention in the West, where his plays are still widely performed, than on its home ground. (For further discussion, see German literature.)