Similar to Volkswagen's dieselgate scandal, it means these cars produce increased emission of harmful nitrogen oxides in the hands of customers compared to when they're tested for type approval by regulators.
It relates to four-cylinder turbo-diesel engines fitted to Euro6-compatible 220d variants of the C-class and GLC SUV, as well as the Vito van.
Afterwards he said the ministry had ordered the "immediate" recall of Daimler models in Germany because they contained "illegal shutdown devices".
Mercedes-Benz said it had developed a technical solution that would enable it to update the software, and Zetsche suggests the move could see the company avoid possible fines by the European Union.
German Transport Minister Andreas Scheuer summoned Zetsche after the KBA's discovery, even as Daimler disputes they were illegal.
The company had earlier said that it contested the legal basis for the finding that the Vito's engine controls were disallowed.
The major difference from the Daimler diesel software and Volkswagen's disastrous diesel scandal is intent.
Six Mercedes-Benz models appeared in environmental lobby group Transport and Environment's 2016 "Dirty 50" list of diesel cars and SUVs, with the finger pointed at both thermal switches and another hot-restart software loophole.
"The principal reason for such gross exceedances (sic) is that carmakers routinely switch-off technologies that clean up the exhaust when the vehicle is driven on the road, and only operate these fully during the narrow conditions of the tests".
According to Bloomberg, the German newspaper Bild am Sonntag reported Sunday, that Daimler doesn't face any fines for the potential wrongdoing, but the automaker is considering an appeal to the ordered recall.
Yet T&E's 2016 survey showed Mercedes-Benz's average diesel fleet emitted 6.4 times the EU's NOx emissions limits, rating as worse than Ford, Kia, Toyota, Honda, Audi, Mazda and Jaguar Land Rover. Marchionne's initial comments surrounding the disputed software centered around its inclusion to prolong the life of the engine, leading many to speculate that exhaust gas recirculation or temperature conditioning could be a culprit.