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Minister for Foreign Affairs Sigmar Gabriel and Chancellor Angel Merkel attend the ceremony to receive dismissal certificate from German President Frank-Walter Steinmeier at Bellvue Palace in Berlin, Germany, October 24, 2017. REUTERS/Fabrizio Bensch

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BERLIN (Reuters) - Turkey's decision to release a German human rights activist is a sign of improving relations between the two NATO allies, Foreign Minister Sigmar Gabriel said on Thursday, adding that Germany wanted all its citizens detained in Turkish prisons freed.

Peter Steudtner, who was released on Wednesday night, was one of about a dozen German or Turkish-German citizens arrested in Turkey in recent months, souring relations that had deteriorated over German criticism of mass arrests in Turkey after a failed coup last year.

"This is the first sign of a thaw, as Turkey has fulfilled all its commitments (in the case of Steudtner)," Gabriel told Der Spiegel magazine, adding that former chancellor Gerhard Schroeder had mediated to secure his release.

Spiegel had reported that Schroeder flew to Turkey on Sept. 25 to discuss the issue of German detainees with President Tayyip Erdogan.

"Now we have to work on the release of the other detainees," Gabriel added. Eleven German citizens are still in detention in Turkey, including four with Turkish-German dual citizenship.

Relations between the two allies deteriorated after Erdogan launched a crackdown on political opponents after a failed coup last year. Germany has criticized mass arrests and refused to extradite people Turkey says were involved in the plot.

Relations with Turkey are a contentious issue in talks on forming a coalition government that Chancellor Angela Merkel's conservative bloc is holding with two other parties after she lost support in an election last month.

In a televised debate with her main opponent before the election, Merkel said she would seek an end to Turkey's accession talks with the European Union.

This hard position is backed by the Christian Social Union (CSU), the Bavarian sister party of her Christian Democrats (CDU), but opposed by the Greens, who along with liberal Free Democrats are seeking a coalition with the conservatives.

(Reporting By Riham Alkousaa; Editing by Joseph Nasr and Toby Chopra)

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