German police on Wednesday stepped up their hunt for the driver of a truck that rampaged through a Berlin Christmas market, in a deadly assault claimed by the militant Islamic State (IS) group.

The sole suspect — a 23-year-old Pakistani asylum seeker — was released late Tuesday for lack of evidence, prompting worries of a killer on the loose and further rattling nerves in a shocked country.

“We can't rule out that the perpetrator is on the run,” Interior Minister Thomas de Maiziere told German broadcaster ZDF.

Twelve people were killed when the Polish-registered articulated truck ploughed into the crowded market on Monday, smashing wooden stalls and crushing victims.

Twenty-four injured remained in hospital, 14 of whom were in critical condition, according to de Maiziere.

The scenes instantly revived nightmarish memories of the July 14 truck assault in the French Riviera city of Nice, where 86 people were killed by a Tunisian militant.

The IS-linked Amaq news agency said “a soldier of the IS” carried out the Berlin carnage “in response to appeals to target citizens of coalition countries”.

There was no evidence to back the claim, nor was the perpetrator identified. Germany is part of a US-led coalition fighting IS in Iraq and Syria.

De Maiziere said several lines of inquiry were being pursued, but “we should let the security services do their job”.

“No-one will rest until the perpetrator or perpetrators have been caught,” he told ARD public television.

The attack comes at a sensitive time for Chancellor Angela Merkel who is running for a fourth term in 2017 but has faced strong criticism over her decision last year to open the country's borders to refugees.

'Dangerous criminal'

In a blow to investigators, federal prosecutors announced they had to release the only suspect in custody after finding no forensic evidence to link him to Germany's deadliest attack in recent years.

The Pakistani man was arrested late Monday after he was reportedly seen jumping out of the truck and fleeing the scene.

But officials had expressed growing doubts over whether they had the right suspect in custody.

“We may have a dangerous criminal in the area,” Berlin's police chief Klaus Kandt said, adding that security would be boosted while urging “heightened vigilance”.

Following the suspect's release, Kandt told ARD television “one or more” perpetrators were believed to be on the run and possibly armed.

Images from the aftermath showed the mangled truck with its windscreen smashed, a trail of destruction in its wake, while survivors recounted harrowing stories of near misses and bloody carnage.

Germany in mourning

A Polish man, killed with a gunshot, was found on the truck's passenger seat, said de Maiziere. He was believed to be the initial driver of the Polish-registered vehicle.

Merkel visited the scene of the carnage for a minute's silence on Tuesday and then joined a memorial service in the adjacent Kaiser Wilhelm Memorial Church.

Mourners placed flowers and candles at the site while German flags flew at half-mast.

Berlin's landmark Brandenburg Gate was lit in the national colours in honour of the victims, and foreign leaders, led by US President Barack Obama, sent their condolences.

Europe has been on high alert for most of 2016, with bloody militant attacks striking Paris and Brussels.

In July, 15 people were injured in two attacks in the southern German state of Bavaria committed by asylum seekers and claimed by IS.

The arrival of 890,000 refugees last year has polarised Germany, with critics calling the influx a serious security threat.

Opponents were quick to seize on the rampage as proof that Merkel's liberal asylum policy had endangered the country.

Marcus Pretzell of the anti-immigration Alternative for Germany party labelled the Christmas market victims “Merkel's dead”.