Despite the drama over Mr. Seehofer's resignation threat on Sunday, several political analysts said the most likely outcome was for both parties to walk back and find a last-minute compromise.
Merkel and Seehofer reached an agreement after hours of talks aimed at resolving a bitter row over immigration that had threatened the coalition government.
Seehofer, a long-time Merkel critic, had openly challenged her with a plan to order border police to unilaterally shutter German border crossings with Austria to many asylum seekers, effectively daring the chancellor to fire him.
He also believes that these elections "would revolve on the immigration issue" with no chance of victory for the Christian Democratic Union.
Merkel could have fired Seehofer. Merkel, who has long favored open borders between European countries, agreed to allow "transit centers" along the Austrian border for the goal of screening asylum seekers.
After a meeting with Seehofer on Saturday evening, Merkel told the German broadcaster ZDF on Sunday that the two people's meeting had "pretty good results", and she hoped to further work with her political ally CSU.
Anla frena obras en Hidroituango
La resolución impone una serie de cargas al constructor del proyecto. La resolución también manifestó que la Sociedad Hidroituango S.A.
German Chancellor Angela Merkel, leader of the Christian Democratic Union, and German Interior Minister, leader of the Bavarian Christian Social Union, at the start of a CDU/CSU parliamentary group meeting on July 3.
Merkel rejected such unilateral German measures and pledged to reach bilateral deals instead with other European Union states.
A real possibility is a break up of the 70-year alliance between the CSU and Merkel's CDU.
Her turnaround was prompted by her Interior Minister, Horst Seehofer, who has demanded that migrants at the border must have papers before advancing past the German welcome mat.
Senior CSU lawmaker and former interior minister Hans-Peter Friedrich wrote on his Twitter account that the CDU and CSU wouldn't let themselves be divided.
Politics professor at Berlin's Hertie School of Governance Andrea Rommele said of the move, "It was a kind of open declaration of war against Ms. Merkel". Last week, an FG Wahlen survey said 91% favour European solutions on migration, an endorsement of Merkel's line and a snub to Bavaria's nationalist push for unilateral border measures.
Though the heated showdown is by far the worst yet between Seehofer and Merkel, it is by no means the first provoked by the Bavarian former state premier who is known for his unvarnished straight talk and political brinkmanship.
Some Social Democrats accuse the CSU of wanting to appear tough on immigration before a regional election in Bavaria in October where the conservatives are expected to lose voters to the anti-immigrant party Alternative for Germany.