When you say German food in Chiang Mai, inevitably two places spring to mind, right next to each other at the Night Bazar in the soi in front of McDonalds: The Hofbrauhaus and Haus Muenchen. The former is the bigger and better of the two, and serves both decent German fare as well as hideous 'hoompa' music. There is however one thing above all that managed to keep me out of there for close to 8 years: The Thai woman staff outside the place, wearing a Bavarian hunters hat and lederhosen.... :-S I am the last person to get fussy about what is proper attire for Thai women, but when I see a lass dressed in said fashion, it makes me itch all over. Which is a shame, because the restaurant isn't half bad and given the ultra-touristy locale, perhaps not even as expensive as you would expect.
Still I don't like the touristyness of the area all that much, which is why I think this out of the way place deserves a plug. It's actually seriously out of the way, no regular tourist is going to just walk past this one: Nobody Restaurant. It's run by a German chef and his Thai wife. I lost track of this place for a while after they moved from their old, and equally 'nowhere' location, behind Payom market off Suthep road.
I'm very happy to have found it again after someone told me on the http://thaivisa.com forum. I like it for it's unpretentiousness and large portions of good old honest German fare. Also 3 kinds of draft beer on tap (!) that are worth checking out. Brand is 'Schwarzer Drachen (Black Dragon)'. Never seen it anywhere except here. Pricing is not ultra cheap, but definitely good value for money. Most main courses cost between 200 and 300 baht.
Directions: When driving on the Superhighway ring road from the Khuang Singh intersection with the Mae Rim road towards the Rincome Intersection with Huay Kaew, you will pass the traffic lights at the U-turn intersection at Wat Jet Yod. Continue straight and then turn left into the soi right after a the big open-air Moo Kata grill restaurant. This is soi Tawan. You will find Nobody restaurant on the right hand side.