Islamic State (IS) has claimed responsibility for a fatal attack on a Berlin Christmas Market, in which a truck ploughed into a crowd of people, killing 12.
The group claimed, through its self-styled news agency, it carried out the attack.
Police had arrested a Pakistani asylum-seeker over the crash, but said he may not be the attacker and the real perpetrator could still be on the run.
Germany's Chief Federal Prosecutor said he had now been released as there was not enough evidence to pursue a case against him.
Officials suggested that a perpetrator or perpetrators might be on the run.
IS said one of its "soldiers" had carried out the attack, in which 49 people were also injured, "in response to calls to target nationals of the coalition countries".
The truck smashed into wooden huts serving mulled wine and sausages at the foot of the Kaiser Wilhelm memorial church, one of west Berlin's most famous landmarks, at about 8pm on Monday. Forty-eight people were injured, 18 severely.
The Pakistani man was captured in a park after reportedly fleeing the scene. He had denied involvement.
The 23-year-old arrived in Germany from Pakistan at the end of last year.
Federal prosecutor Peter Frank said the style of attack and the target suggested Islamic extremism.
News of the man's arrest had led politicians in Germany and beyond demanding a crackdown on immigration.
Chancellor Angela Merkel told reporters: "There is much we still do not know with sufficient certainty but we must, as things stand now, assume it was a terrorist attack."
She added: "I know it would be especially hard for us all to bear if it were confirmed that the person who committed this act was someone who sought protection and asylum."
Berlin police tweeted that they were "particularly alert" because of the arrested man's denial of any involvement.
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Die Welt newspaper quoted an unnamed police chief as saying: "We have the wrong man. And therefore a new situation. The true perpetrator is still armed, at large and can cause fresh damage."
The truck belonged to a Polish freight company and its rightful driver was found dead in the vehicle. Interior Minister Thomas de Maiziere said a pistol believed to have been used to kill him had not yet been found.
German media said the arrested man had jumped out of the driver's cab and run down the street towards the Tiergarten, a vast park in central Berlin. Several witnesses called police, including one who chased the suspect while on the phone, constantly updating officials on his whereabouts.
The attack fuelled immediate demands for a change to Ms Merkel's immigration policies, under which more than a million people fleeing conflict and poverty in the Middle East, Africa and elsewhere have arrived in Germany this year and last.
"We must say that we are in a state of war, although some people, who always only want to see good, do not want to see this," said Klaus Bouillon, interior minister of the state of Saarland and a member of Ms Merkel's Christian Democrats (CDU).
Horst Seehofer, leader of the CDU's Bavarian sister party, said: "We owe it to the victims, to those affected and to the whole population to rethink our immigration and security policy and to change it."
The record influx has hit Ms Merkel's ratings as she prepares to run for a fourth term next year, and boosted support for the anti-immigrant Alternative for Germany (AfD). AfD leader Frauke Petry said Germany was no longer safe and "radical Islamic terrorism has struck in the heart of Germany".
- Reuters / BBC