Last year, a French court ordered the service provider Yahoo to prevent French internet users from accessing websites auctioning Nazi memorabilia.
Internet service providers that carry neo-Nazi or other racist websites are being threatened with legal action by Germany's Central Council for Jews.
The group says it has been forced to go to the courts because of the German Government's failure to impose laws banning the dissemination of Nazi propaganda.
The action is intended to convince the government to follow France's example, says the council's vice-president, Michel Friedman.
Last year, a French court ordered the service provider Yahoo to prevent French internet users from accessing websites auctioning Nazi memorabilia.
Although it is still fighting the case, Yahoo has since removed the offending sites.
The German Interior Ministry has confirmed the existence of around 800 German-language websites containing neo-Nazi content.
It says most of them have been set up in America, and those responsible are protected by US freedom of speech laws.
However, late last year, Germany's Supreme Court ruled that anyone posting Nazi material aimed at internet users inside Germany could, in theory, be prosecuted under German law.
Pursuing the culprits, though, could be extremely difficult - which is why the internet service providers themselves are now in the firing line.
The ISPs argue that extending national laws into cyberspace is fraught with moral and practical difficulties.
Their biggest fear is that imposing a patchwork of different restrictions in different countries would make the internet commercially unviable.