Gabriel said Germany would talk to EU partners about Turkey's aspirations to join the bloc and made clear Berlin could no longer guarantee German corporate investment in Turkey.
"We need our policies toward Turkey to go in a new direction ... we can't continue as we have done until now. We need to be clearer than we have been until now so those responsible in Ankara understand that such policies are not without consequences," Gabriel told reporters. He said the new steps had been agreed with Chancellor Angela Merkel.
Gabriel said Germany had revised its travel advice in the wake of the recent arrests including German national Peter Steudtner.
Steudtner "was no Turkey expert - he never wrote about Turkey, he had no contacts in the political establishment ... and never appeared as a critic," Gabriel told reporters.
Meanwhile, Deputy Prime Minister Responsible for the Economy Mehmet Şimşek dismissed reports claiming that Turkey is investigating German firms for alleged terror support.
German daily Hadelsblatt claimed Thursday that dozens of German companies, including Mercedes owner Daimler AG and BASF SE are accused of supporting terrorism by Turkey.
In a message posted on his Twitter account, Şimşek dismissed the reports and said that Turkey welcomes German investors.
Ten suspects, including Steudtner, Swedish national Ali Gharavi and Amnesty International Turkey director İdil Eser, were detained after Turkish police raided a meeting held at a hotel on the island of Büyükada, across the shore from Istanbul, for allegedly planning provocative events that would fuel unrest across Turkey, similar to the notorious Gezi Park riots in 2013.
Six suspects were arrested on terrorism charges, while four suspects were released under judicial control. In addition to Germany, the arrests prompted reactions from the U.S. and Sweden.
Earlier in the day, Turkey's Foreign Ministry criticized recent statements by German government spokesperson regarding the arrests, saying that interference in Turkish judiciary is unacceptable.
Gabriel, who returned to Berlin from a holiday to deal with the incident, said that he would work with Chancellor Angela Merkel and European Union officials to decide on other sanctions against Turkey.
The measures being considered include withdrawing export guarantees and pre-accession funding to Turkey from the EU, Gabriel said.
"I don't see how we can continue guaranteeing companies' investments in Turkey," Gabriel said in response to President Recep Tayyip Erdoğan's decision to blacklist dozens of German companies it suspects of supporting terrorism.
Local media reported Thursday that Ankara had suggested swapping German nationals being held in Turkey for Turks it suspects of supporting last year's failed coup attempt that were subsequently granted asylum in Germany.
"There is no official offer of a swap," Gabriel said. "There has been no correspondence and no phone call" in which such a swap was suggested, he added.