The co-ordinated raids on 60 addresses were the first time the authorities had acted on this issue in such a way.
The aim is to tackle what police called "a substantial rise in verbal radicalism".
Typical crimes included "glorification of Nazism [and] xenophobic, anti-Semitic and other right-wing extremism", they said.
Holger Munch, president of Germany's federal criminal police authority, the Bundeskriminalamt (BKA) said: "Today's action makes it clear that police authorities of the federal and state governments act firmly against hate and incitement on the internet."
He said politically motivated hate crime on the internet had increased significantly in the wake of the European refugee crisis.
Last year, Germany took in up to one million migrants and refugees.
"Attacks on refugee shelters are often the result of radicalisation which begins in social networks," Mr Munch said.
Raids in 14 provinces
Much of the alleged hate speech took place in a secret Facebook group between July and November 2015, police said.
The raids were carried out across 14 German provinces, involving 25 police departments.
Incitement of racial hatred is a crime under German law and a person can be jailed for up to five years in a case of inciting "hatred against a national, racial, religious group or a group defined by their ethnic origins".
Facebook, Twitter and Google have all come under fire in Germany for failing to remove hate speech from their platforms promptly.
Under pressure from the German authorities, the three tech firms agreed at the end of last year to delete such speech from their services within 24 hours.
Facebook also agreed to a series of further measures including:
- Partnering with a German group of multimedia service providers to solve the problem
- Launching a task force to deal with hate speech on the internet
- A campaign to promote "counter speech" in German, drawing in experts to develop ways to combat racism through discussions on social media.