Uff, you are spoiled for choice!

Near Munich, there are a plethora of utterly inspiring Bavarian towns, from Mittenwald to Lindau. I haven't yet visited Nuremberg but I do hear great things which may make it worth a visit (as an alternative to Munich).

For absolute gingerbread village dream you are hard pressed to beat Freiburg im Breisgau and Rothenberg.

For urban charm, the neighboring cities of Dusseldorf and Cologne make for varied and comfy short break destinations.

But one of my personal favourites is stunning Dresden.  The town is in what was once Eastern Germany and it also shows a majesty suitable to the capital of the former principality of Saxony (now a free state).  Just north of Dresden is the picturesque riverside town of Meissen which would satisfy any fairyland ideas you may have ;) Also near Dresden, Leipzig and Quedlinburg may be good options to circle off a Saxon itinerary.

Hope you have a great trip!

Lots of excellent suggestions already.  I'll just add Goslar and Wernigerode in the Harz Mountains to consider.  These are two really nice, quaint, smaller towns.

HanauGermany is the home to the Grimm Brothers. Authors of all the modern Fairy Tale stories. It also is just right outside of Frankfurt. They also have a museum and college for jewelry making and some great architecture. In Southern Germany close to Stuttgart there is a quaint little town of Schwabisch Gmund. Also you can't go wrong with Berchtesgadenwith Hitlers reconstructed Eagles nest, Garmisch-Partenkirchen with their painted buildings, OberammergauPassion Play or Neuschwanstein Castle which is where Walt Disney got his idea for Cinderella's Castle. The List goes on and on.

If you go to Berlin you should not miss out Potsdam. It is a very beautiful place with many parks, palaces and nice cafes and restaurants. It is best to go to Potsdam by S-Bahn or Regionalexpress, which takes only 30 to 40 minutes from Berlin Hbf. (Main Station). I would also advise you to see Rothenburg, a very old little town not too far from Nuremberg. By the way, Prague, Dresden and Leipzigare worth seeing too.

I can absolutely recommend Freiburg im Breisgau. And I don't say that just because I've been living here for 25 years now. ;-) The flood of tourists speak for itself. It's a sweet picturesque town with a lot to offer besides cobblestones, the minster and pretty streets. It's Germany's "Green City", so you'll come across tons of bikes, vegetarian restaurants etc. Also, it's a very lively student town, so there are always cool events, parties and places full of young people. Here are some insider tips from a real Freiburgian:

- the district Gerberau 

- Get a smoothie at "Saftlädele" (Augustinergasse) and drink it at Augustinerplatz in the sun, a very Freiburgian thing to do

- Hike up the local mountain Schlossberg for an amazing view on Freiburg. 

- Also, the Black Forest is very close, so you might wanna go up Schauinsland for an (more or less) easy hike and beautiful views  

- some nice student cafés and restaurants are Café Moltke, Café Pow (both slightly outside the city centre), Aspekt, Coucou (good food!) and Hummus Corner; some hip student locations for a few drinks in the evening are Schlappen, Feierling (they brew their own delicious beer and in summer you can sit in a lovely beer garden) or Juris (if you like it a bit more chic)

- If you wanna try out local food you should eat "Flammkuchen" (kind of a Pizza with cottage cheese, onions and bacon), "Wurstsalat" ( baloney salad) and of course pretzels 

Here's a very good article on Freiburg: 

http://www.telegraph.co.uk/travel/destinations/europe/germany/9892046/Freiburg-Germany-Europes-huge-secret-gem.html

Hope you'll find the time to visit my beautiful home town. :-)

oh! Germany has so many lovely cities...I'll do a north to south attempt here!

Hamburg Cologne Dusseldorf Potsdam (small and lovely) Dresden (you can't even tell it was destroyed in WWII) Rothenburg (picturesque) Heidelberg Nuremberg (beautiful gothic city) Regensburg (equally beautiful as Nuremberg) Bamberg Freiburg im Breisgau

hope it helps!

P.S. all but Hamburg, Cologne and Dusseldorf fall into the quaint category

I adored Rothenburg-it is a little bit tourtisted, but had that traditional Bavarian village feel.  Very quaint, cobblestone streets, and all walking.  In the same general vicinity, we were really surprised by Nuremberg-the town itself flows down to the river and then back up-with a beautiful rampart around the perimeter.  Heidelberg is just delightful, and make sure to do a half day cruise up the Necker River too-not just the beautiful town (which has plenty to do as well).  Lastly, Lindau along the Bodensee was spectacular-the lake was calm and peaceful and provided a slightly different setting than other South Germany towns.  Oh, and if you want to see Neuschwantstean Castle, the town of Fussennearby was a lot of fun as well.

Bonn, Trier, and Mainz are nice smaller cities. For reaaaallly small towns look at Boppard, Unkel, and other towns along the "Romantic Rhine."

HI Aerin,

hard to answer question. There are a lot of nice towns big and small. It depends more on your preferences? are you looking for historic places, towns with great view, nightlife, anything special, like a castle or fortress and so on...

I will list a couple here, if you could give me a better idea of your likings, i can narrow it down for you.

There is Regensburg at the danbue river, which has a lot of historic parts to see and walk through the old city. Also worth a visit Walhalla

or the Donaudurchbruch (take a boat tour and also stop Kloster Weltenburg) a famous monastery and they also brew there own beer, which is very famous.

Also check out Neuschwanstein Castle already famous by itself.

Another interesting city in germany is Nuremberg. A old city with a lot of historic markers, buildings and museums.

Also Stuttgart is worth a visit and if you are into history and a bit into cars check out the Mercedes-Benz Museum, they tell you not only the story of the car manufacturer also of germany. 

Wurzburg is famous for its wine, and there are a lot of great hiking possibilities. also a historic town which also has a fortress.

Also Lake Constance is a beautiful area, here you should visit Lindau or in Swiss see the Rhine Falls a big huge waterfall of the Rhine river.

In the South there is also Garmisch-Partenkirchen worth to be mentioned and in Austria Salzburg since its so close.

http://gatetoadventures.com/stopover-salzburg/

In the north you could visit Hamburg famous for its harbor and old harbor buildings.

There is a lot to see. really depends on what you looking for. I could go on and on ;) 

Hello Aerin, Wow, Swedish perhaps?  I live in Bavaria and have for years.  I was lucky enough to live in Santa Barbara as well for some time.  I think the best small towns are Rothenburg as well as Bamberg which is bigger but nice...  For a bigger city Dresden is great and a little off the beaten path...  Do you bicycle?  A bicycle trip in the Alps from Garmisch-Partenkirchen to the Austrian town of Ehrwald is one of the most beautiful things I've ever done...  Right up there with the drive on the PCH when I lived in Santa Maria, CA...  These are all my pics except the Rothenburg one since it's never been this nice out when we went!  Good luck!!!

Heidelberg is a lovely old city with a large river, castle and old town architecture, cafes and shops

Nuremberg is really lovely and the area around Fussen is also really nice, despite the fact that it's a hub for tourists. Both very close to Munich.