Germany’s Bild reports around 200 rounds of ammunition was found at Spandauer Damm, close to the festivities at Charlottenburg Palace, Berlin.
A German police spokesman confirmed the find, however, officers played down reports the bag had any link to the Christmas market.
The spokesman also said the incident is not being treated as terror related.
Islamic State (IS) has been circulating hateful messages among its secret jihadi messaging groups, calling for attacks on Christmas markets.
On December 1 officers were deployed to Potsdam market in Germany after a suspicious package was handed in to a nearby pharmacy.
A verified police Twitter account, Police Brandenburg_E, said the “IED suspicion has been confirmed” and said an evacuation was under way where the discovery was made.
Full details of the Berlin incident are yet to emerge.
Twelve people were killed in 2016 when a truck was driven through a Berlin Christmas market.