But she stressed it was crucial to maintain a "permanent dialogue" with Moscow, especially ahead of a possible summit on the Syria conflict that could also include the leaders of Turkey and France.
Merkel will host Putin from 1600 GMT at the government retreat in Meseberg castle north of Berlin, where they will only give media statements and not hold a joint press conference.
Merkel Friday called the low-key visit a "working meeting" where "no specific outcomes" were expected.
"But the problems we are dealing with, from Ukraine to Syria to issues of economic cooperation, are so numerous that they justify maintaining a permanent dialogue," she said.
"There will be controversial issues and there will of course be points where we are thinking about how we can promote and improve bilateral and international cooperation."
Relations have been increasingly tense between Russia and Western powers over Ukraine, Russia's backing for Syrian leader Bashar al-Assad and Moscow's alleged spy activities, cyber-attacks and election meddling in NATO member states.
However, Merkel and Putin also share common concerns -- both have been targeted by US President Donald Trump in a range of different political and trade disputes.
Trump, who is fighting accusations of election collusion with Russia, has accused Berlin of being a "captive" of Moscow and strongly opposed plans for a Russia-Germany gas pipeline project, Nord Stream 2.
Kremlin spokesman Dmitry Peskov said Friday that Putin and Merkel would talk about "bilateral relations as well as the implementation of major joint commercial projects, against the backdrop of threats by third countries to these projects".
'Tense situation'
Putin and Merkel, veteran leaders who speak each others' languages fluently, last met in May in the Russian Black Sea resort of Sochi.
Merkel on July 24 also held an unusual meeting in Berlin with Russia's army chief of staff Valery Gerasimov.
On the Syria conflict, Merkel on Friday confirmed an announcement by Turkish President Recep Tayyip Erdogan of plans for a summit with the leaders of Russia and France, but she said no date had been set yet.
Although Syria peace talks should broadly be led by the UN and other established groupings, Merkel said such a four-way summit "could make sense".
"It must be well prepared, that's why no date has been set yet," she told a Berlin joint press conference with Montenegro's Prime Minister Dusko Markovic.
"But we will arrange for advisors to hold a preparatory meeting and then decide whether it makes sense to hold such a meeting together."
She said she had also discussed this by telephone with Erdogan, pointing to the "very, very tense situation" in Syria's rebel-held northwestern province of Idlib, now the focus of Assad's troops after sweeping military gains -- helped by direct Russian support -- across Syria.
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