Merkel "continued to impress the world with her cool leadership at two back-to-back summits," Forbes said.
The magazine cited her work getting leaders at the Group of Eight summit to agree to goals for cutting greenhouse gas emissions and persuading European Union leaders to get moving on a treaty to replace their failed constitution.
Several other female heads of state or government made the list, including Britain's Queen Elizabeth at No. 23, New Zealand's Prime Minister Helen Clark at No. 38, Finland's President Tarja Halonen at No. 50 and Philippines president Gloria Arroyo at No. 51.
U.S. Sen. Hillary Rodham Clinton was No. 25 and U.S. House Speaker Nancy Pelosi No. 26, while first lady Laura Bush was 60th.