Authorities in the states of Hesse and North-Rhine Westphalia have ordered retailers to stop selling the beverage.
The consumer ministries in the two states confirmed they had ordered retailers to pull the drink off their shelves after a food safety institute in North-Rhine Westphalia found the drug in samples.
"The institute examined Red Bull Cola in an elaborate chemical process and found traces of cocaine," said Bernhard Kuehnle, head of the food safety department at the federal ministry for consumer protection.
Authorities said the cocaine levels did not pose a health threat but were not permitted in foodstuffs.
The investigation found the drink to contain a non-cocaine extract of coca leaf in the drink.
That means the drink cannot be classified as a foodstuff but as a narcotic and needs a special license, authorities said.
Rewe, the German retail group, had already issued orders to remove the fizzy drink from its shops. Wilhelm Deitermann, a spokesman for the North-Rhine Westphalia consumer ministry, said he expected most "if not all – other German states to follow suit and ban the drink".
Red Bull Cola has protested the action. "De-cocainized (sic) extract of coca leaf is used worldwide in foods as a natural flavouring," said a spokesman.
The company added that Red Bull Cola as well as other food that contains coca leaf extract is considered safe in the EU as well as in the US.
The more popular Red Bull, dubbed the "clubbers' drink," is often mixed with vodka. It contains caffeine, vitamins, and sugar which, the company claims, kick-starts the body's metabolism and keeps people alert.
