Support for the anti-immigration, climate-sceptic AfD has climbed to a record high of 18-20 percent in the latest opinion polls, ahead of Scholz's own Social Democrats.
The surge has been driven by public discontent with Scholz's bickering three-party coalition, concerns about immigration, the increased cost of living and government plans to phase out gas and oil heating.
Nevertheless, Scholz said he didn't expect the AfD's good fortune in the polls to last.
"I'm quite confident that the AfD won't perform very differently at the next parliamentary elections (in 2025) than it did at the last," Scholz said at his annual summer press conference.
The AfD took around 10 percent of the vote at the 2021 elections.
The decade-old party stunned the political establishment when it scored nearly 13 percent in 2017, entering the national parliament for the first time after capitalising on anger over an influx of refugees.
Scholz said right-wing populism was on the rise in a number of European countries, and stressed that the "large majority" of Germans backed democratic parties.
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The best way to counter the Alternative for Germany (AfD) was to "give citizens sufficient reasons to believe in a good future", Scholz said.
Government measures to support households and companies through the energy transition, new legislation to attract foreign skilled workers and efforts to limit "irregular migration" would all help "to strengthen the cohesion of our society", he added.
Key gains for AfD
Scholz also criticised the infighting that has dogged his coalition, particularly over contentious legislation about new heating systems.
"It's no secret that there was a loud discussion, neither I nor anyone else liked it," Scholz told reporters in Berlin.
An opinion poll for public broadcaster ZDF on Friday put support for the AfD at a fresh high of 20 percent, behind the opposition conservative CDU/CSU with 27 percent.
Scholz's SPD came third at 17 percent, followed by his coalition partners the Greens at 16 percent and the pro-business FDP with seven percent.
To the alarm of mainstream parties, the AfD recently notched up two high-profile victories in local-level elections.
It won its first-ever district administrator in the central state of Thuringia, and its first full-time town mayor in the eastern region of Saxony-Anhalt.
Both states are holding regional elections next year, with the AfD hoping to score major breakthroughs.
READ ALSO:Â Why the far-right AfD's victory in an east German district is so significant
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