The fixture has been arranged with an eye on the 2014 World Cup, which will be held in Brazil, and will take place just a week after the start of the 2013-14 Bundesliga season.
"In view of the 2014 World Cup in Brazil, the coaching team wanted to play against a team from South America," said the German Football Association's (DFB) general secretary Helmut Sandrock.
"We are pleased that we were able to reach an agreement so quickly with the Paraguay Football Association."
Although Germany cannot seal qualification for the World Cup prior to the fixture, they will use the game as preparation for key qualifying matches against Austria and the Faroe Islands in September and potentially decisive fixtures with the Republic of Ireland and, finally, Sweden in October.
Coach Joachim Low is nevertheless confident about his side's chances of qualifying for the World Cup, which is why he is so keen to face South American opposition.
"It is a welcome opportunity for us to get used to the typical South American style of play a year ahead of the World Cup in Brazil," he said.
"They play fast, direct football and have players with exceptional technical ability."