After a pulsating 90 minutes in Porto Alegre had ended goalless, Chelsea forward Andre Schurrle - on as a half-time substitute for Mario Gotze - cleverly flicked in Thomas Muller's low cross two minutes into extra-time to give Germany the lead.
Mesut Ozil added a second late on to wrap up victory for Joachim Low's side, before Algeria, who performed admirably throughout, gained a consolation through Abdelmoumene Djabou.
The result meant Algeria were unable to exact revenge for the "Disgrace of Gijon", when West Germany and Austria played out a mutually beneficial 1-0 scoreline that saw both sides through from the group at the expense of Algeria in the 1982 finals in Spain.
With many pointing to that infamous match as motivation for Vahid Halilhodzic's men in the build-up, Algeria flew out of the blocks in the opening 20 minutes, cutting through the German backline on a number of occasions and seeing an Islam Slimani goal disallowed for offside.
The African nation - making their first appearance in the second round - continued to impress, but Germany, who will now face France at the Maracana on Friday, finished the stronger and remain on course to reach the semi-finals of a fourth successive World Cup.
Algeria made a flying start and Manuel Neuer had to make a sliding tackle to deny Slimani an effort on goal from wide on the left in the ninth minute, after the goalkeeper had initially misjudged a charge from his line.
Sofiane Feghouli wasted a good position six minutes later, blazing the ball wildly across goal from the byline with two team-mates better placed.
Slimani converted Faouzi Ghoulam's wonderful cross from the left with a diving header in the 17th minute, but the referee's assistant correctly ruled that the Sporting Lisbon man had strayed offside, before Ghoulam flashed another effort narrowly off target as Algeria continued to dominate.
Germany gradually grew into the game towards the end of the first half, Muller heading wide and Ozil testing Rais M'Bolhi with a dipping effort.
Yet Algeria hit back in the 39th minute, Mehdi Mostefa thumping in a shot from 25 yards which deflected off Jerome Boateng and past the left-hand post with Neuer completely wrong-footed.
M'Bolhi made a superb double stop two minutes later, parrying Toni Kroos' drive away and then springing to his feet to keep out Gotze's rebound.
Germany enjoyed a more assured opening to the second period, Schurrle seeing an effort deflected just wide before Skhodran Mustafi, who replaced Mats Hummels (flu) in defence with Boateng switching to centre-back, headed straight at M'Bolhi from Kroos' delivery.
Philipp Lahm went close in the 55th minute, his curling effort diverted wide by an acrobatic save from M'Bolhi.
As the game wore on the play became stretched and Slimani sent a rasping effort from distance straight into the arms of Neuer 15 minutes from time.
Germany responded strongly and Muller ought to have scored his fifth goal of the tournament shortly afterwards, but his powerful header was beaten away by M'Bolhi.
Muller had another clear chance moments later, stabbing the ball wide after a glorious touch to bring the ball under control, while Bastian Schweinsteiger was unable to seriously trouble M'Bolhi with a weak header from Lahm's chipped pass.
Low's side then struck early in the first extra period, Schurrle adjusting brilliantly to backheel Muller's cross from the left into the net.
Algeria could have levelled through Mostefa, who snatched an effort wide from 10 yards after Germany failed to deal with a corner.
Ozil then made the game safe in the closing stages, lashing high into the net after Schurrle had been denied just in front of the goalline by Essaid Belkalem, although there was one final twist as Djabou converted a right-wing cross at the back post to net a deserved consolation for Algeria.
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