German Chancellor Olaf Scholz (front) and the President of Cyprus Nikos Christodoulides (covered) arrive for a joint press conference at the Chancellery in Berlin on May 25, 2023. AFP
It follows Russia's decision to force Germany to slash its diplomatic staff and presence at public institutions such as the Goethe Institute cultural organisation and the German school in Moscow by the beginning of June, the source said.
The source confirmed a report in the German daily Sueddeutsche Zeitung, which described it as a "diplomatic declaration of war by Moscow" in Berlin.
"This is a unilateral, unjustified and incomprehensible decision," the German foreign ministry said in a statement.
A close economic partner with Russia before Moscow invaded Ukraine, Germany has since moved away from Moscow, financially and militarily supporting Kyiv in the conflict.
Since the onset of the conflict in Ukraine, Russian espionage in Germany has grown at a rate rarely equalled in recent years, according to German security services.
In mid-April, Germany expelled a number of Russian diplomats "to reduce the presence of intelligence services" which prompted a tit-for-tat response from Moscow that booted out some 20 German embassy staff.
The Russian foreign ministry in April set a ceiling for the number of German diplomats and representatives of public organizations allowed to stay in Russia, the German foreign ministry said.
"This limit set by Russia from the beginning of June implies major cuts in all areas of (Germany's) presence in Russia," the source said.
The ministry did not give a figure for the number of people affected, but a government source said the Sueddeutsche Zeitung daily report of several hundred people affected was "correct".
German authorities have tried in recent weeks to get the Russian ministry to reverse its decision, but without success, the paper said.
As a result, German officials, diplomatic and consular staff, but especially those working in culture and education, will be required to pack their bags in the coming days.
In spring 2022, Germany already expelled some 40 Russian diplomats who Berlin believed to represent a threat to its security.
Last October, the head of German's cybersecurity agency, Arne Schoenbohm, was fired after news reports revealed his proximity to a cybersecurity consultancy believed to have contacts with Russian intelligence services.
A month later, a German reserve officer was handed a suspended prison sentence of a year and nine months for spying for Russia.