The 20-year-old Dutch driver set a quickest lap of one minute 13.085 in soaring afternoon track temperatures, with Formula One world champion Hamilton second and 0.026 slower for Mercedes.
Hamilton had been four thousandths of a second off the pace in the morning when Ricciardo lapped in 1:13.525.
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"It was a nice surprise to start so competitively here but we have to remember it is only Friday," said Verstappen. "The others will be quicker for qualifying."
Verstappen's pace may concern Mercedes more than Ricciardo's, with the Australian set to start from the back of the grid due to an accumulation of grid penalties, but he also lost time due to a small oil leak.
Hamilton was happy with his day's work as Hockenheim welcomed Formula One back after a year's absence for what could be the last grand prix there for some time.
"We've got through our programme today, finished all the sessions and got all the information we needed from the tyres," the Briton said.
"Both Ferrari and Red Bull were very quick today and I think it will be very similar tomorrow and on Sunday.
"It's going to be a serious challenge and it's not an easy track to get right, so we will have to give it everything," added the four-times champion.
Weather forecasts predict rain on Saturday with dry conditions on race day.
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