In a statement on Friday, Merkel pledged to remain "strong and determined" alongside France.
Further reaction came from the UK when a Downing Street spokesperson said, "The UK strongly condemns the appalling terrorist attack in Paris. The Prime Minister has passed on her condolences to President Hollande."
Elsewhere, US President Donald Trump said people had to be strong and vigilant.
"Our condolences from our country to the people of France," he said. "It looks like another terrorist attack and... what can you say? It just never ends."
François Hollande's government held a meeting with security chiefs on Friday morning.
The killing, claimed by Isis, of a policeman on the Champs-Elysées on Thursday night has thrown yet more uncertainty into an already hard-to-read French presidential contest.
Some candidates have called off final rallies ahead of Sunday's first round on security concerns, while others insist life must go on.
Far-right leader Marine Le Pen, an MEP, who has been edged out of first place in opinion polls in recent weeks by centrist Emmanuel Macron, reacted by saying, "The battle against terrorism starts by claiming back our national borders and stopping this naivety."
Local media say the 39-year-old shooter lived in the city's suburbs, and had been seen as a potential Islamist radical.
The gunman also wounded two police officers before being shot dead by security forces on the Champs-Elysées. The whole of the Champs-Elysées was evacuated.
French Prime Minister Bernard Cazeneuve said security forces, including elite units, were fully mobilised ahead of Sunday's presidential poll.
"Nothing must be allowed to impede the fundamental democratic process of our country," he said.
The attack took place as 11 candidates in Sunday's closely fought presidential election were engaged in a final joint TV appearance to argue their policies.
Three of the four main candidates, centrist Emmanuel Macron, centre-right François Fillon and Front National leader Le Pen, have called off planned events on Friday, which would have been the final day of campaigning.
Fillon said on Friday that the fight against "Islamist totalitarianism" should be the priority of the next president, calling for better cooperation between world powers, and saying he would boost security services, review the penal code and isolate radical prisoners.
Further comment came from Macron who urged French citizens not to "give in to fear".
"What they want is a collapse in morality, what they want is to watch us fall into ruin," he said.