The man, identified as David S., was arrested on August 10 in the city of Potsdam, near Berlin, Germany’s Federal Prosecutor’s Office said in a statement.
It said the suspect was hired as a local staff member at the embassy.
The Russian Embassy in Berlin declined to comment, saying the diplomatic mission “currently does not have any official information from the German side on this issue.”
Berlin was taking the case “very seriously,” a German Foreign Ministry spokesman said, adding that “spying on a close ally on German soil is not something we can accept.”
According to the German statement, the suspect has allegedly cooperated with Russian intelligence since November 2020 and on at least one occasion passed documents linked to his job to Russian agents in exchange of financial compensation.
The arrest was the result of a joint investigation by German and British authorities.
A judge at the Federal Court of Justice in Karlsruhe is to decide later on August 11 on whether the Briton should be remanded in custody.
Moscow is at loggerheads with a number of Western capitals after several high-profile incidents in recent years, including a series of espionage scandals, that have resulted in diplomatic expulsions.
Earlier in June, German authorities arrested a Russian citizen accused of passing sensitive information from a German university to Moscow in return for cash.
And German prosecutors in February filed espionage charges against a German man suspected of passing the floor plan for the parliament building in Berlin to Russian intelligence services.