The 143 professors said the church must implement bold reforms because of "a crisis without precedent" following the discovery of widespread sexual and physical abuses by clergymen a year ago.
More Christians than ever have turned their backs on the Catholic Church in the past year, they said. "The Church has to understand these signs and move beyond its ossified structures to regain new vitality and credibility."
The appeal, published in newspaper Sueddeutsche Zeitung's Friday edition, called on the church's leadership to stop excluding gay couples and remarried Christians.
"The Church also needs married priests and women holding positions in the clergy," the appeal said - in clear defiance of the Vatican's dogmas.
But Germany's Bishops Conference on Friday cautiously welcomed the appeal, saying it could enhance the ongoing reform discussion, while noting several proposals contradicted the church's principles.
"On some issues, the memorandum is in conflict with theological convictions and church regulations that are highly binding," Bishops Conference Secretary Hand Langendoerfer said in a statement.
The appeal - signed by a few Austrian, Swiss and by almost a third of Germany's Catholic university theologians - is a rare challenge to the clergy establishment and the Vatican, because the church has a veto right in appointing theologians at Germany's state-run universities.
But the wealthy Catholic Church in the homeland of Pope Benedict XVI sees the number of its followers dwindling, leading to lower proceeds every year, and ever fewer young men choosing to become priests.
Several leading lawmakers from Chancellor Angela Merkel's Christian Democratic Party - among them parliamentary Speaker Nobert Lammert and Education Minister Annette Schavan - last month also appealed to Germany's bishops to fight for the vow of celibacy's abolition, citing "the increasing lack of priests."
The theologians, in turn, said the challenges are already obvious for a long time, but there are still no church reforms within sight.
"The disturbance of open dialogue without any taboos does not go well with everybody, especially when there's a papal visit upcoming," the theologians said, referring to Benedict's planned visit in September.
The professors also called for a more democratic and less centralized church, including giving the faithful a say in appointing their priests and bishops. "What can be decided locally, should be decided there," the appeal said.