Due to its relative stability and its strategically significant location on the Red Sea, Djibouti is of great importance as a logistic hub for humanitarian assistance in the Horn of Africa and as a commercial platform for the region. Diplomatic relations were established when Djibouti gained independence in 1977 and are amicable. In spring 2010, Germany opened its embassy in Djibouti, while Djibouti has maintained an embassy in Berlin since autumn 2011 – one of its 23 embassies worldwide. Djibouti is a cooperation partner of the CSDP operation ATALANTA to combat piracy off the Horn of Africa and to protect vessels being used by the UN World Food Programme (WFP), as well as the EU operation ASPIDES and the African Union Mission in Somalia (AMISOM). It benefits from regional projects supported by Germany and organised via the IGAD regional organisation (Intergovernmental Authority on Development) and also from EU and UN-funded measures.

The EU is the biggest donor to Djibouti. The priorities of EU engagement are infrastructure projects, particularly in the fields of water and sanitation, as well as macroeconomic support and assistance for good governance. The largest EU project in Djibouti to date is a seawater desalination plant, which commenced operations in March 2021.

Germany supports internally displaced persons and refugees in Djibouti (some 23,000) and in neighbouring countries (Somalia, Kenya, Yemen and Ethiopia), through the provision of flexible, regional UNHCR funding. Via IOM and IGAD funding, Germany supports around 600,000 people, for whom Djibouti is a country of transit, destination and return. Funds from the EU Emergency Trust Fund for Africa (EUTF) benefit both refugees and the local population.

The German Government, through the Federal Ministry for Economic Cooperation and Development, provides support to IGAD, including for its work to improve drought resilience and food security, as well as to promote a migration policy in the region. Germany is the second-largest donor to IGAD after the European Union.

Djibouti offers investment potential for German companies, particularly in the spheres of transport and infrastructure, logistics (ports), renewable energies (photovoltaic, wind and geothermal energy), not to mention digitalisation. Germany and Djibouti do not have an investment promotion and protection agreement.