Photos: G7 to discuss 'standing up to Russian aggression' - Obama
The two leaders then sat down to a traditional Bavarian meal of sausages and beer in the sunshine.
Greece's debt crisis and how to tackle global warming will also be on the agenda.
Ahead of the G7 gathering, thousands of protesters marched in the nearby town of Garmisch-Partenkirchen, sparking sporadic clashes with police.
Several marchers were taken to hospital with injuries, but the violence was minor compared to some previous summits.
Security is being provided by 17,000 police officers.
The two leaders then sat down to a traditional Bavarian meal of sausages and beer in the sunshine.
Greece's debt crisis and how to tackle global warming will also be on the agenda.
Ahead of the G7 gathering, thousands of protesters marched in the nearby town of Garmisch-Partenkirchen, sparking sporadic clashes with police.
Several marchers were taken to hospital with injuries, but the violence was minor compared to some previous summits.
Security is being provided by 17,000 police officers.
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60Kg White Sausages for Obama and co by butcher Zeno Berg from Mittenwald |
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G7 venue schloss Elmau includes 47 suites, 3 Restaurants, pools, Spas and yoga facilities |
The summit is also being attended by Nigerian President Muhammadu Buhari, Japanese Prime Minister Shinzo Abe, UK PM David Cameron, French President Francois Hollande, Canada's PM Stephen Harper and Italian PM Matteo Renzi.
Mrs Merkel will also be hoping to use the summit to discuss her plans for radical reform of global responses to pandemics like Ebola.
She wants to streamline and re-focus the World Health Organization, widely judged to have been ill-equipped when Ebola hit, and build up an international reserve force of doctors and scientists for deployment in a future crisis.
Mr Cameron will unveil plans for a squad of ''disease detectives'' ready to fly anywhere to identify new infections.
On Monday, the summit is also due to discuss militant threats from groups like Islamic State and Boko Haram with the leaders of Nigeria, Tunisia and Iraq, who form part of an "outreach" group of non-G7 countries.
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