The right-wing party Alternative for Germany (AfD) has opened up a dramatic new political battleground by transforming itself into a blatantly anti-Islam movement.

Less than a week ago Germany was plunged into a bitter row about freedom of speech after Chancellor Angela Merkel gave the go-ahead for Turkish President Recep Tayyip Erdogan to prosecute a German comic.

TV host Jan Boehmerman, 35, mocked Mr Erdogan in a little-watched broadcast in March.

Now the AfD is warning of the Islamisation of Germany.

The party's call for a ban on aspects of Muslim life has sparked a debate about religious freedom in a country that is home to around five million Muslims, mainly from Turkey.

Ms Merkel has rejected the AfD's claims that Islam is out of step with the constitution and represents a danger to the nation.

"In Germany we have the constitutionally guaranteed freedom of worship, and that is true for Muslims in our country," she said this week.

The AfD's description of Islam as a "foreign body in Germany" comes amid fractious debate over the influx of largely Muslim asylum seekers fleeing war and poverty in Africa and the Middle East.

Europe's refugee crisis 'a gift'

AfD deputy leader Beatrix von Storch has described Islam as not being compatible with the German constitution.

"We are in favour of a ban on minarets, on muezzins (the person who calls the faithful to prayer) as well as full veils," she said.

As tensions increase, Muslim leaders in Germany, including the chairman of the Central Council of Muslims, Aiman Mazyek, have hit back at the right-wing party.

"For the first time since Hitler's Germany there is a party that again seeks to discredit an entire religious community and threatens its existence," he said.

Germany's mainstream political parties, in particular Ms Merkel's conservative Christian Democrats (CDU), have struggled to find a strategy to counter the AfD, which was founded in February, 2013.

In December, Ms Merkel's CDU called for a ban on the burka in public places.

Earlier this month a leading figure in the Christian Social Union (CSU), the Bavarian-based, arch-conservative allies of Ms Merkel's CDU, proposed a so-called "Islam law" that would make the German language obligatory in mosques and prevent foreign financing of Islamic organisations.

"We cannot tolerate a situation in which extremist views are imported from abroad. Europe must cultivate its own form of Islam," CSU general secretary Andreas Scheuer said.

CSU leaders have also lashed out at Ms Merkel for not doing more to curb the influx of refugees, which the AfD has successfully exploited.

Many analysts now see the AfD as transforming itself into the German version of France's anti-immigrant National Front, playing on fears about migrants and linking them to criminal activities.

According to the party's leader in the German state of Brandenburg, Alexander Gauland, the refugee crisis is "a gift".

The AfD only narrowly missed out on entering the national parliament at the 2013 election, but went on to win seats in the European Parliament before a string of stunning successes in German state elections.

The party is now represented in half of Germany's 16 state legislatures.

A small group of asylum seekers wait at their temporary accommodation in Berlin for the their asylum papers, as the refugee debate in Germany intensifies. ( Supplied: Andrew McCathie )

Merkel denies asylum seeker chaos

Ms Merkel has scrambled together proposals for what she described as an historic integration law aimed at demonstrating that her government has the refugee crisis under control and countering the AfD's claims of "asylum chaos" in Germany.

The Chancellor's plan includes stiff penalties for asylum seekers who fail to follow measures designed to integrate them into German society.

Ms Merkel has also announced new measurers to combat terrorism.

The integration law formed part of a series of moves spearheaded by Ms Merkel to help stem the flow of refugees.

Among them, an EU deal with the Turkish government to stop migrants leaving Turkey for Europe, in exchange for cash and accelerating Turkey's EU membership.

Ms Merkel appears to have paid a high price for her deal with Turkey.

She is accused of sacrificing a German artist and press freedom to appease the autocratic Turkish President.

The AfD has been at the forefront of the critics, and one of its leaders, Joerg Meuthen, said her move showed the Chancellor's "political subservience" to Mr Erdogan.