They said the chief suspect, a 53-year-old man from the western city of Wuppertal, had threatened to release private photos and videos and demanded 15 million euros (£12.5m) from Schumacher's family.
These allegedly included images of the seven-time Formula One champion before and after the 2013 skiing accident in the French Alps which left him with a serious brain injury.
Schumacher, 55, has not been seen in public since.
The images allegedly came from another 53-year-old, from the western town of Wuelfrath, who worked as a security guard for the Schumacher family until 2021.
He is suspected of having sold the material for a "five figure" sum and could face a "considerable" jail term on charges of being an accomplice to attempted blackmail and breach of privacy.
Prosecutors say the chief suspect rang an employee of the Schumacher family several times in June this year to demand the money.
He allegedly threatened to leak the images onto the so-called "dark net" if money was not paid.
The chief suspect faces charges of attempted blackmail with a maximum jail sentence of up to 15 years, although prosecutors say the punishment could be reduced as the threat was not followed through.
The Wuppertal man's 30-year-old son has been charged with being an accomplice to blackmail, as his father had asked him to create an untraceable email address.
This was used to send the Schumacher family samples of the blackmail material, prosecutors said.
The family alerted authorities in Switzerland, where Schumacher has been cared for at his family home since the accident.
Swiss investigators traced the plot to Germany through the phone number used to call the family.
