"I will defend the idea of joining the big coalition, I will do all it takes to achieve this, "said Nahles, whose party, however, disagrees about joining a new large coalition of conservatives".
Schulz on Friday then gave up plans to become German foreign minister, hoping to shore up support among SPD members for the new coalition - but the manner in which he anointed Nahles as his successor rankled with many in the party.
Schulz, 62, ditched plans to take the post of foreign minister after fierce criticism from some former allies, not least because he had pledged not to serve in a cabinet with Merkel. If party members reject the agreement, the new coalition government can't be formed.
The party's membership will vote next week on the coalition deal struck last week between Mr Schulz and Mrs Merkel.
Kevin Kuehnert, who leads the SPD's youth wing and is campaigning for members to vote against another tie-up with Merkel, welcomed the decision as he said it would enable the party to focus completely on the members' coalition ballot.
PM Narendra Modi bats looking at keeper, says Rahul Gandhi
The clash history between BJP and Congress President Rahul Gandhi is perpetually going on since the last week. But today with elections just round the corner, you are meeting a few farmers only as a PR event.
"Not only has a Bavarian politician passed the pinnacle of his career, but probably a woman from the north too", he added in a dig at Merkel and Horst Seehofer, leader of the arch-conservative Bavarian sister party (CSU) to Merkel's CDU.
The SPD will now put a coalition deal to its 460,000 members for a vote later this month, with results due on March 4.
Schulz is expected to take a seat on the SPD's backbenches. Mr Schulz secured six ministries in a new government for the SPD, including finance, foreign and labour, giving the Social Democrats a critical role in shaping Berlin's policy on Europe over the next four years. The SPD was at a record low of 16.5 percent, barely ahead of the far-right Alternative for Germany (AfD).
Many within the SPD harbour misgivings about sharing power with Merkel, believing the party should rebuild in opposition after suffering its worst result in last September's election since Germany became a federal republic in 1949.
The chairman of the Association of Social Democratic Lawyers in the SPD, Harald Baumann-Hasske, also brought up the legality of appointing a new chair, per the party's charter.