The first trains began running around 9am AEST on Wednesday, before services restarted through the morning.
Tuesday's disruption was caused by a fault in GSM-R, short for Global System for Mobile Communications - Railway, the digital radio system used by rail staff during railway operations across Deutsche Bahn's network.
The state-owned German rail operator said the disruption had been resolved, although major delays and cancellations were expected to persist into the morning commute in some areas.
Regional and suburban rail operators run by Deutsche Bahn also said services were gradually restarting, but warned major delays and cancellations were likely to persist into Wednesday.
"We were able to stabilise the situation with an emergency system. We now need to determine the cause," chief executive Evelyn Palla told Bild newspaper.
IT experts had worked continuously to resolve the outage, the company said, thanking passengers for their patience.
Many passengers were left stranded, with long queues at information desks in stations. Deutsche Bahn said it was providing affected passengers with taxi and hotel vouchers.
The outage affected long-distance and regional trains, as well as some commuter rail services operated by Deutsche Bahn. Berlin's entire S-Bahn network and S-Bahn services in Stuttgart were halted.
Other urban transport systems, including Hamburg's subway network, continued to operate normally.
Private rail operators were also affected. Metronom, which runs regional passenger services in northern Germany, said all of its trains had been impacted.
Freight traffic was also brought to a halt. The Association of Private Freight Railways called for a detailed review of the two-hour outage.
DPA
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