The move, by the Foreign Minister, Joschka Fischer, is intended to squash a revolt by ageing diplomats who have been arguing that former ambassadors with Nazi pasts should be honoured by the ministry when they die. There is little doubt that the investigation will dig up some dark secrets.
The American historian Christopher Browning has already said that during the Nazi period Germany's foreign ministry "contributed significantly to the Final Solution [the mass murder of Jews]".
Mr Fischer announced that he would establish the commission in May, after his decision to stop the foreign ministry's in-house magazine, InternAA, publishing obituaries for workers and diplomats with clear links to Nazi Germany.
It was a move which angered many former diplomats who responded with a letter stating that Mr Fischer's decision "showed the over-simplification of people who, as recently as 1968, thought they couldn't trust anyone over the age of 30".
The dispute broke out earlier this year after Mr Fischer objected to a InternAA tribute for a former consul general. He had been a member of the Nazi party and was later convicted of war crimes.
Mr Fischer was also said to be perturbed that a portrait of Baron Alexander von Dörnberg, a Foreign Office head of protocol and friend of the Nazi Foreign Minister, Joachim von Ribbentrop, was still hanging in the gallery of the foreign ministry. Mr Fischer said the ministry must face up to "the personal continuities and lines of connection" between the Nazi-era and the post-war West German foreign ministry.
When Adolf Hitler became Chancellor in 1933, German diplomats continued to work for the regime. Many joined the Nazi party but said that it had been for career reasons.
Although some diplomats did support the resistance against Hitler, the only high-level public resignation came from Friedrich von Prittwitz, who gave up his post as German ambassador to the US in 1933.
The investigative commission, which is scheduled to meet in September, will be composed of three German professors, Eckbert Conze, Klaus Hildebrand and Norbert Frei, the American historian Henry A Turner from Yale University and Professor Moshe Zimmermann from the Hebrew University, Jerusalem.
The commission will investigate to what extent ex-Nazis continued to work for the foreign ministry after the war and how well the ministry dealt with its own past. The work is likely to take up to five years.
The only previous investigation was ordered in 1951 but it petered out quickly amid fears about what it might discover.