This paper examines innovative approaches to teaching German literature in higher education and analyzes their pedagogical significance in the development of students’ literary competence, interpretative independence, critical thinking, intercultural awareness, and communicative ability. The relevance of the topic is determined by the changing goals of university education, where literature teaching is expected not only to transmit knowledge about authors and texts but also to shape flexible, reflective, and intellectually active learners. Traditional explanatory models often remain focused on reproductive learning, while current educational practice requires dialogic, student-centered, digitally supported, and competence-oriented forms of instruction. The study draws on theoretical analysis of literary-didactic, pedagogical, and methodological sources and interprets the role of interactive reading, problem-based learning, contextual and intercultural interpretation, project work, and digital tools in the teaching of German literary texts. The findings indicate that innovative approaches increase student motivation, deepen textual engagement, support collaborative meaning-making, and connect literary study with modern academic and professional demands. At the same time, their effectiveness depends on methodological balance, the preservation of close textual analysis, and the professional preparedness of the teacher. The paper concludes that the modernization of German literature teaching in higher education should proceed through the integration of classical philological rigor with contemporary pedagogical strategies that activate students’ analytical, aesthetic, and intercultural potential.