Speaking in Santiago, Joachim Gauck said his country's diplomats should have said something about the atrocities committed at Colonia Dignidad.
But he said Germany did not share responsibility for them.
The enclave was used as a torture centre during the Pinochet era.
It was set up by a former Nazi officer, Paul Schaefer, in the 1960s as an agricultural commune of German migrants.
A Chilean congressional report said in 2010 that Colonia Dignidad - which means Dignity Colony - operated as a "state within a state" during the Pinochet regime, thanks to Schaefer's close ties to the country's ruling elite.
Thousands of children and young people were physically and psychologically abused there.
Germany said in April that it would release classified documents it has on the colony for research purposes.
The German president has condemned the human rights violations at a secretive colony of ethnic Germans in Chile in the 1960s and 1970s.