More than 1,400 guests attended the opening of the biggest Turkish embassy in the world in central Berlin, including German Foreign Minister Guido Westerwelle.
"We want the Turks in Germany to speak fluent German," Erdogan said in his speech. "In this sense they should be bilingual and participate more and more in life here."
"They should not see themselves as guests here," he said. "They should see themselves as belonging here." At the same time, he said Turks should recognize that "a strong Turkey, with a strong economy and an active foreign policy" was standing behind them.
In his speech, Westerwelle emphasized that the three million people of Turkish origin living in Germany enriched German culture. "We cannot imagine our society without them. They are a part of us," he said.
He also called for greater cooperation between Turkey and the European Union, and said the two-year stalemate in negotiations for Turkey's entry into the EU was not doing either side any good.
Acknowledging that Turkey had realized many reforms, he promised a "new beginning" on talks in the coming year. "There is a lot still to do, but important stages have been reached," he said.
Erdogan also offered Turkey's help in the ongoing euro debt crisis.
The new embassy was built on property bought by the Ottoman Empire in 1918, where Turkey's old embassy was situated until 1944, when it was destroyed by Allied bombs in World War II.
Erdogan is scheduled to hold a meeting with Chancellor Angela Merkel on Wednesday.