It had earlier banned an internet-associated doll called, My Friend Cayla, for similar reasons.
Telecoms regulator the Federal Network Agency urged parents who had such electronics to destroy them.
One expert said the choice could be a “game-changer” for internet-connected devices.
“Poorly guarded smart devices often allow for isolation invasion. That is really touching when it comes to kids’ GPS tracking watches the very observers that are supposed to help keep them safe,” said Ken Munro, a security expert at Pen Test Partners.
“There is a surprising lack of regulation of the ‘internet of things’, which allows lax companies to sell us dangerously insecure smart products.
“Using isolation regulation to ban such devices is a game-changer, stopping these companies playing fast and loose with our kids’ security,” he added.
In a statement, the company said it had already taken action into several firms offering such watches on the internet.
“Via an app, parents can use such issues watches to listen unnoticed to the child’s situation and they are to be regarded as an unauthorized transmitting system,” said Jochen Homann, president of the Federal Network Agency.
“According to our study, parents’ watches are also used to listen to professors in the classroom.”
The firm also asked schools to “pay more offerings” to such watches among students.
Such watches which are sold by a large number of providers in Germany are frequently aimed at children between the ages of five and 12.
Most are implemented with a Sim card and a limited telephony purpose and are set up and controlled via an app.
In October, the Norwegian Consumer Council (NCC) reported that ‘some children’s watches including Gator and GPS for kids had flaws such as sending and storing data without encryption.
It meant that visitors, using basic hacking techniques, could track issues as they moved or make a child appear to be in a totally different location