The Austrian, facing an uncertain future at the Ferrari-powered team after scoring just one point so far this year to team mate David Coulthard's 10, lapped in one minute 15.628 seconds.
Briton Jenson Button was second fastest for Honda, ahead of Brazilian team mate Rubens Barrichello.
Ferrari's seven times world champion Michael Schumacher, chasing this third win in a row in what could be his final appearance before his home crowd, was ninth fastest.
Renault's Fernando Alonso, celebrating his 25th birthday, was 11th
Alonso, the youngest champion in the history of Formula One, leads Schumacher by 17 points in the standings with six races remaining after Hockenheim.
Toyota's Jarno Trulli had a disappointing morning, a day after the team announced a three-year extension to his contract, when he pulled over with a smoking engine.
Japanese Sakon Yamamoto, making his grand prix race debut on Sunday, hit the wall heavily in his Super Aguri with a minute of the session remaining.