The body of a 23-year-old woman was found in a car in August at the Bavarian town of Ingolstadt with multiple stab wounds.
Police initially said they believed the victim owned the car, but the next day identified her as someone else who looked “remarkably similar”.
The 23-year-old German-Iraqi and a 23-year-old Kosovan man were arrested on suspicion of manslaughter.
However, police are now working on the theory the pair murdered the victim after tracking her down online because she looked similar to the German-Iraqi.
“Investigators now believe the female suspect wanted to go into hiding and fake her death due to family problems,” they said in a statement Monday.
She had contacted several women who looked like her via social media and attempted to lure them into meeting her by making “false promises”, the police said.
She contacted the victim in early August and arranged to meet her on August 16.
The German-Iraqi woman and the Kosovan man travelled to the victim’s home in Heilbronn, near Stuttgart, to pick her up.
On the way back to Ingolstadt, they allegedly lured her out of the vehicle in a wooded area and killed her, inflicting “a large number” of knife wounds.
The suspects then continued on to Ingolstadt, where the body was found lying in the car in the evening.
According to the daily Süddeustche Zeitung, the German-Iraqi was a beautician who entrapped the victim via Instagram by offering her cosmetics.
Both women had “long brown hair, a dark complexion and a heavily made-up face”, the newspaper said.