Electronic and crystal structure studies are presented to describe the role of intersite and onsite interactions for antiferromagnetic ordering in CeAg2Ge2. The crystal structure showed a prominent magnetovolume effect with anomalous negative thermal expansion at low temperature as a consequence of itinerant electron magnetism. The direct hybridization gap with a V-shaped band observed in the angle resolved photoemission data at room temperature, indicates that spin polarized quasiparticle states exist in the gapped region. Valence band broadening and enhanced localization effects at low temperature indicate strong hybridization of the valence orbitals of Ce atoms with the near neighbor Ge atoms. We find that the intersite interaction between the Ce atoms at high temperature stabilizes the onsite interaction at low temperature that leads to the spin density wave type antiferromagnetism in CeAg2Ge2.