On a two-day visit to Europe, Starmer said he wanted to "reset" the UK's relations with the EU.
"That does not mean reversing Brexit or re-entering the single market or the customs union, but it does mean a closer relationship on a number of fronts," he said at a press conference after talks with Scholz.
The German leader welcomed Starmer's bid to improve British-EU relations given Britain was indispensable to solving the big issues affecting Europe.
"I am delighted that Keir Starmer has announced that he will seek a fresh start in relations with the EU," Scholz said.
"We want to take this outstretched hand."
Starmer ruled out a "youth mobility scheme" which would allow young Europeans to work visa-free in the UK and vice versa.
"In relation to youth mobility, obviously, we've been really clear - no single market, no customs union, no free movement, no going back into the EU," he told reporters.
"So the discussion about a close relationship with the EU, is in that context and within those frameworks."
He also expressed his condolences over the deadly knife attack in the western German city of Solingen on Friday.
Starmer was expected to discuss with Scholz, a fellow leftist, a new pact they hope will bring about an unprecedented degree of bilateral military co-operation and greater collaboration in areas such as trade and energy.
Britain and Germany, NATO allies and western Europe's biggest defence spenders, are looking for ways to increase defence co-operation ahead of a possible scaling back of US military support for Ukraine if former US president Donald Trump returns to the White House early next year.
The Republican presidential candidate has warned that if elected, he would fundamentally rethink "NATO's purpose and NATO's mission".Trump has also not committed to sending further aid to Ukraine and said he would not defend allies that do not increase their defence budgets.
An Anglo-German defence partnership could resemble the Lancaster House pact between Britain and France agreed in 2010, according to officials, with pledges to create a joint force and share equipment and nuclear missile research centres.
The two sides will continue negotiations over the next six months with the aim of completing the deal early next year, according to Starmer's office. It would follow the signing of a joint defence declaration in July.
While in Germany, Starmer will also hold talks with business leaders including Armin Papperger, chief executive of German arms manufacturer Rheinmetall, who according to media reports last month was the target of a Russian assassination plot. The Kremlin said the reports were fake and could not be taken seriously.
After the talks in Germany, Starmer will head to Paris for the Paralympics opening ceremony on Wednesday night, and hold a breakfast meeting on Thursday with executives from companies including Thales, Eutelsat, Mistral AI and Sanofi.
He is expected to meet Paralympic athletes as they prepare for competition, before having talks with President Emmanuel Macron at the Elysée Palace.
with DPA and PA
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