German arms manufacturer Rheinmetall said Wednesday it had agreed a sponsorship deal with Borussia Dortmund, as the Bundesliga club prepares to contest the Champions League final.

The new sponsor sparked controversy, with Economy Minister Robert Habeck saying the "unusual" sponsor was also a reflection that "unfortunately we are (now) in another, more threatening world".

The three-year tie-up includes advertising space at Dortmund's ground and at press conferences, Rheinmetall said in a statement.

Rheinmetall's logo would already appear around the club in the build-up to Saturday's Champions League final at Wembley in which Dortmund will face Real Madrid, the group said.

Rheinmetall and Dortmund shared "similar ambitions, attitudes and origins", the defence firm's CEO Armin Papperger said in the statement.

The partners represented the "pursuit of excellence and international success", Papperger added.

Germany's largest manufacturer of military equipment has seen demand for its products soar in the wake of the Russian invasion of Ukraine.

The advent of the war has seen European governments plough more money into defence in response to the increased Russian threat.

Nowhere has the change in attitudes been more drastic than in Germany, where the government dropped its previously cautious stance and massively increased military spending.

"Security and defence are fundamental cornerstones of our democracy... Especially today, when we see every day how freedom must be defended in Europe," Dortmund CEO Hans-Joachim Watzke said in the statement.

"We should deal with this new normality," Watzke said, adding that the club was "consciously opening ourselves up to a dialogue" on the issue.

The decision to accept the sponsorship deal with Rheinmetall -- worth a "single-digit-million" euro sum per year -- was hotly debated within the club, according to the German financial daily Handelsblatt.

Team officials were aware of the potential risks of signing the agreement with the arms company, it reported.

News of the deal sparked outrage in some quarters.

The far-left Linke party demanded an end to the sponsorship, with the group's spokesman on sports affairs telling the Funke newspaper group that it was "simply unthinkable for a Champions League finalist to be appearing in stadiums in future for an armaments company".

Amnesty International also joined in, saying that "sports should not be used to whitewash the poor human rights records of companies."

Russia's invasion has however seen many Germans reevaluate their attitudes towards defence and towards Russia -- including in the world of sport.

Dortmund's big local rivals Schalke, who currently play in the second division of German football, dropped a sponsorship deal with Russian state energy firm Gazprom after the start of the war in 2022.

Gazprom's logos disappeared from the team's shirts and the gas giant's representative on Schalke's supervisory board stepped down.