The triple world champion beat his compatriot by 0.235 seconds at the Nurburgring, with his Red Bull team-mate Mark Webber third-quickest and Romain Grosjean’s Lotus fourth.
Mercedes’s Lewis Hamilton was eighth-fastest behind Ferrari’s Felipe Massa, with Kimi Raikkonen fifth ahead of Fernando Alonso.
There were no tyre problems following supplier Pirelli’s decision to bring tyres featuring a different design to Germany.
“I wasn’t so happy with the car this morning and Mercedes were quick, but in the afternoon we were in better shape,” said Vettel. “We’ll see, but so far I am happy.
“To be clear about yesterday and the GPDA meeting: the general agreement was that we’re happy Pirelli bought a new specification of tyre for this event and want to thank them for their flexibility and reaction times – they were able to find a solution in only a couple of days.
“The circumstances that we raced under in Silverstone were not what we can accept, but I don’t think we will see those issues again.”
Force India’s Paul di Resta, who ended up 10th-fastest, admitted he was not feeling entirely comfortable with the new rear tyres.
“It was quite a tricky session with lots to think about overnight,” said Di Resta.
“There’s room to improve the set-up because I’m not feeling as comfortable as I usually do. Tyre-wise we’ve done a lot of running across the two compounds to give us enough data to understand the impact of the new rear tyres.
“The two compounds are different extremes so we need to make sure we can get both in the right operating window.”
1. Sebastian Vettel Germany Red Bull-Renault 1m 30.416s
2. Nico Rosberg Germany Mercedes-Mercedes 1m 30.651s
3. Mark Webber Australia Red Bull-Renault 1m 30.683s
4. Romain Grosjean France Lotus-Renault 1m 30.843s
5. Kimi Raikkonen Finland Lotus-Renault 1m 30.848s
6. Fernando Alonso Spain Ferrari-Ferrari 1m 31.056s
7. Felipe Massa Brazil Ferrari-Ferrari 1m 31.059s
8. Lewis Hamilton Britain Mercedes-Mercedes 1m 31.304s
9. Jenson Button Britain McLaren-Mercedes 1m 31.568s
10. Paul di Resta Britain Force India-Mercedes 1m 31.797s
11. Adrian Sutil Germany Force India-Mercedes 1m 31.824s
12. Daniel Ricciardo Australia Toro Rosso-Ferrari 1m 31.855s
13. Jean-Eric Vergne France Toro Rosso-Ferrari 1m 32.055s
14. Sergio Perez Mexico McLaren-Mercedes 1m 32.086s
15. Nico Hulkenberg Germany Sauber-Ferrari 1m 32.495s
16. Esteban Gutierrez Mexico Sauber-Ferrari 1m 32.762s
17. Valtteri Bottas Finland Williams-Renault 1m 32.879s
18. Pastor Maldonado Venezuela Williams-Renault 1m 32.880s
19. Charles Pic France Caterham-Renault 1m 33.695s
20. Giedo van der Garde Holland Caterham-Renault 1m 33.804s
21. Jules Bianchi France Marussia-Cosworth 1m 34.017s
22. Max Chilton Britain Marussia-Cosworth 1m 34.667s
23. Rodolfo Gonzalez Venezuela Marussia-Cosworth 1m 37.459s*