Prosecutors said that three men and one woman were accused of founding a far-right group and procuring explosives.
They added that a previously unknown group, the “Old Schools Society”, had been planning to attack mosques and hostels for asylum seekers. The suspects were arrested in raids across five German states involving some 250 investigators.
“In the search, pyrotechnics with large explosive power and further pieces of evidence were confiscated,” said the prosecutor’s office in a statement.
The number of people seeking asylum in Germany has risen dramatically in the past year, with more than 200,000 applications in 2014 alone.
On Tuesday, the government said it expected the number to climb as high as 400,000 this year.
Searches were conducted in Bavaria, Saxony, North Rhine-Westphalia, Rhineland-Palatinate and Mecklenburg-Western Pomerania.
Prosecutors added that they were still trying to determine whether the group had concrete targets or dates for attacks.
The suspects are to be brought before the investigating judge of the Federal Court on Thursday, reports say.
The suspected head of the group was from the Bavarian city of Augsburg, according to German media. Its 39-year-old vice president was believed to be from the eastern state of Saxony.
Tensions over immigration have risen in recent months, particularly in Saxony.
Thousands of people attended marches in Dresden earlier this year under the banner of anti-Islamisation group, Pegida. However, support for the group has since fallen amid splits in its leadership.