Vettel and Hamilton are big rivals for the Formula 1 drivers championship this season.
The German racer was looking to extend his lead over the defending champion on home soil.
And he got his wish as Hamilton endured a nightmare qualifying session at Hockenheim.
German Grand Prix: Who is on pole?
Sebastian Vettel blitzed through the field to take top spot.
Hamilton’s Mercedes team-mate Valterri Bottas looked to have taken it, but Vettel pipped him with a lightening-quick final lap of the track.
German Grand Prix: What happened to Lewis Hamilton?
Hamilton suffered a major setback after stopping on track, and then trying to push his car.
The Briton stepped out and leaned across to steer as marshals gave a helping hand, before giving up the battle as the first session ended.
He then crouched down next to the stricken car after it had been wheeled off the track, resting his helmeted head on the front in apparent shock.
A Mercedes spokesman said Hamilton, who is eight points behind Ferrari’s Sebastian Vettel in the title battle at the halfway point in the season, had lost hydraulic pressure.
Hamilton had been only fifth fastest in the opening qualifying session, with speculation – dismissed by the team – earlier on Saturday that he was either feeling unwell or suffering from a stiff leg.
Barring any further grid penalties, a possibility if the gearbox is damaged, he will start 14th on Sunday in what is a home race for his Mercedes team and also Ferrari’s Vettel.
/ Motorsport – ENG Portals