Chancellor Angela Merkel says attempts to build a multicultural society in Germany have "utterly failed".
In a speech in Potsdam, she said the so-called "multikulti" concept - where people would "live side-by-side" happily - did not work.
A recent survey by the Friedrich Ebert Foundation showed that more than 30% of Germans believed Germany was "overrun by foreigners".
The BBC reports it also showed that roughly the same number thought that some 16 million of Germany's immigrants or people with foreign origins had come to the country for the social benefits.
Mrs Merkel told a gathering of younger members of the Christian Democratic Union party on Saturday that at "the beginning of the 60s our country called the foreign workers to come to Germany and now they live in our country...
"We kidded ourselves a while, we said: 'They won't stay, sometime they will be gone', but this isn't reality.
"And of course, the approach [to build] a multicultural [society] and to live side-by-side and to enjoy each other... has failed, utterly failed."
In her speech, the chancellor specifically referred to recent comments by German President Christian Wulff who said that Islam was "part of Germany" like Christianity and Judaism.
While acknowledging that this was the case, Mrs Merkel stressed that immigrants living in Germany needed to do more to integrate, including learning to speak German.
"Anyone who does not immediately speak German", she said, "is not welcome".
Earlier this week, Horst Seehofer, the leader of the CSU party in Bavaria said: "'Multikulti' is dead."