Germany accepts its guilt for the Holocaust and "stands side by side with Israel", its president has told the Israeli Parliament in Jerusalem.
Koehler also visited Sderot, a town often hit by Palestinian rockets
President Horst Koehler said the Holocaust was part of Germany's identity and that it would fight any new anti-Semitism.
He is on a visit to mark 40 years of diplomatic ties.
He began his address in Hebrew after some members threatened to boycott a speech delivered in German.
Mr Koehler also warned against any attempt to downplay the Holocaust.
"Comparisons which try to play down the Shoah [Holocaust] are scandalous and we must oppose them... aggressively," he said.
The speech comes nearly a week after the world marked the 60th anniversary of the liberation of Auschwitz death camp, where many of the six million Jews killed in the Holocaust died.
A ceremony at the site in Poland was attended by Mr Koehler among other world leaders, but the German president did not speak publicly on that occasion in recognition of Germany's role as perpetrator of the Holocaust.
Mr Koehler continued his speech in German but it was not immediately clear how many members of the Knesset had joined the boycott.
Koehler's Knesset speech is only the second by a German president
"I want to underline that the responsibility for the Shoah forms part of the German identity," he said.
"That Israel can live within internationally recognised borders, free from fear and terror, is an incontestable maxim of German politics."
He was welcomed by Knesset speaker Reuven Rivlin as "a real friend and a courageous man".
However there were warnings by Mr Rivlin and Israeli Prime Minister Ariel Sharon that anti-Semitism was again on the rise in Europe and the Middle East.
"Today, in Europe and in Germany, we are witnessing and hearing the same slogans, the same aggression and the same incitement to hatred against the Jews," said the speaker.
Mr Sharon warned of a new anti-Semitism which questioned the Israeli state's "very legitimacy and its fight against terrorism".
Mr Koehler, who earlier visited the Yad Vashem Holocaust memorial, is only the second German president to address the Knesset, following a speech by Johannes Rau in 2000.
His visit, during which he also visited the Israeli town of Sderot, is due to end on Friday.