German media and politicians have warned against an election-year spike in fake news after the rightwing website Breitbart claimed a mob chanting “Allahu Akbar” had set fire to a church in the city of Dortmund on New Year’s Eve.

After the report by the US site was widely shared on social media, the city’s police clarified that no “extraordinary or spectacular” incidents had marred the festivities.

The local newspaper, Ruhr Nachrichten, said elements of its online reporting on New Year’s Eve had been distorted by Breitbart to produce “fake news, hate and propaganda”.

The justice minister of Hesse state, Eva Kühne-Hörmann, said that “the danger is that these stories spread with incredible speed and take on lives of their own”.

The controversy highlights a deepening divide between backers of German chancellor Angela Merkel’s liberal stance toward refugees and a rightwing movement that opposes immigration, fears Islam and distrusts the government and media.

Tens of thousands clicked and shared the Breitbart.com story with the headline “Revealed: 1,000-man mob attack police, set Germany’s oldest church alight on New Year’s Eve”.

It said the men had “chanted Allahu Akbar (God is greatest), launched fireworks at police and set fire to a historic church”, while also massing “around the flag of al-Qaida and Islamic State collaborators the Free Syrian Army.”

The local newspaper said Breitbart had combined and exaggerated unconnected incidents to create a picture of chaos and of foreigners promoting terrorism.

Stray fireworks did start a small blaze, but only on netting covering scaffolding on the church and it was put out after about 12 minutes, the paper reported. The roof was not on fire and the church is not Germany’s oldest.

Dortmund police on Thursday said its officers had handled 185 missions that night, sharply down from 421 the previous year. The force’s leader judged the night as “rather average to quiet”, in part thanks to a large police presence.

The Frankfurter Allgemeine Zeitung daily said Breitbart had used exaggerations and factual errors to create “an image of chaotic civil war-like conditions in Germany, caused by Islamist aggressors”.

It said the article “may be a foretaste” of what is to come before parliamentary elections expected in September as some websites spread “misinformation and distortion in order to diminish trust in established institutions”.

Justice minister Heiko Maas warned in mid-December that Germany would use its laws against deliberate disinformation and that freedom of expression did not protect “slander and defamation”.

Bild, Germany’s top-selling daily, also predicted trouble ahead – pointing to the fact that Breitbart’s former editor Steve Bannon had been appointed as US president-elect Donald Trump’s chief strategist.

It warned that Breitbart – which plans to launch German and French language sites – could seek to “aggravate the tense political climate in Germany”.

Breitbart has declined to comment.