A photo of Mr Steinbrueck on the front cover of a news magazine shows him giving the middle-finger gesture.
On Twitter he said he was annoyed with journalists who confronted him with "yesterday's news".
His actions drew many comments on Twitter - and political rivals' scorn.
"This gesture is unacceptable for a chancellor candidate," said Economy Minister Philipp Roesler of the Free Democrats (FDP), Mrs Merkel's junior coalition partner. "Something like that is just not on."
An MP in Mrs Merkel's conservative Christian Democratic Union (CDU), Wolfgang Bosbach, said "someone who presents himself like that before the elections doesn't want to become chancellor".
Mr Steinbrueck, a former finance minister, made the gesture during a photo shoot for Sueddeutsche Zeitung; he was reacting to a question about his perceived gaffes during the election campaign.
"You don't always need words to speak clearly - for instance if you're constantly confronted by yesterday's news, instead of being asked about the really important issues," Mr Steinbrueck commented on Twitter.
Opinion polls suggest that the centre-left Social Democrats (SPD) are trailing behind the CDU ahead of the 22 September election.
Mr Steinbrueck has a reputation for plain-speaking. In February he caused offence among Italians by saying "two clowns" had won the Italian election.
In a commentary on his gesture, Sueddeutsche Zeitung said "he wants to lead one of the world's economic powers - so the question arises: Excuse me, but what does this mean?
"One week before the election! Who does he want to impress with this? Perhaps it's all the same to him now. He feels long misunderstood, unfairly treated," the commentary said.
The man seen as Chancellor Angela Merkel's main rival in the German election - Social Democrat Peer Steinbrueck - has sparked heated debate by giving a rude gesture.