The rail operator said it had, "carefully examined again the risks and opportunities" of expanding into what could become a very competitive market.
"In the interest of our clients, staff and shareholder (i.e. the German state), we will not take needless risks and will instead focus on our core business," Bahn executive Ulrich Homberg said in a statement.
The German government intends to subject the inter-city bus sector to more competition by changing regulations that date from the 1930s and have limited the number of operators.
Deutsche Bahn already is the country’s biggest regional bus operator, owning Bex, Autokraft and Regiobus Dresden, which in 2009 ran 22 routes and served 700,000 passengers.
But it will now remain in the regional bus business rather than expand further for the time being.
The announcement came as a surprise to some, who believed Deutsche Bahn was well-positioned to undercut potential competitors and become a bigger player in the long-distance bus market.
Sources with knowledge of the situation, however, told the Süddeutsche Zeitung that there had been disagreement on the company’s board about whether to expand further into the bus business.
Some said buses represented a chance to win new customers – such as students and senior citizens – put off by train travel by high prices. They argued that other companies would take up the business if Deutsche Bahn failed to do so, the newspaper said.
Others on the board worried that Deutsche Bahn would be shooting itself in the foot by luring train travellers to buses, according to the Süddeutsche Zeitung.
The railway operator suffered a setback this April when a court rejected its complaint against a bus company that organises collective trips between major cities via the Internet.
The ruling found that activity did not violate competition laws, suggesting the sector could become attractive to low-cost operators.
The railway operator already has a number of problems to deal with, most notably mechanical problems affecting its high-speed and suburban trains, and is currently focused on linking Germany with the UK via the Channel tunnel.
It has also faced intense criticism for service disruptions during the winter. The company has said it is investing millions of euros to improve service efficiency in the future.
Plans to privatise the company remain on ice.