"I'm satisfied that we have disrupted what I would regard as the final stages of a large scale terrorist attack ... here in Australia," New South Wales Police Commissioner Ken Moroney told Australian Broadcasting Corp. radio.
A lawyer for eight of the men said among those arrested is a leading Algerian-Australian cleric who has said that while the killing of innocents is wrong, he would be violating his faith if he warned his students against joining the jihad, or holy war, in Iraq.
Moroney said 400 officers, including federal and state police, were involved in raids in Sydney.
The Australian Federal Police said in a statement that eight men were arrested in Sydney and nine in Melbourne in the coordinated raids that also netted evidence including chemicals, weapons, computers and backpacks.
The arrests followed a 16-month investigation by federal and state police and intelligence agents. Several of the suspects as this past weekend were closely linked to fugitive Saleh Jamal, a Sydney man who was arrested on weapons charges in Lebanon.
The Australian found that a command post had been established Monday in Sydney and a parallel operation was underway in Melbourne.
Moroney said apparent bomb making materials were found during the raids.
He said chemicals were found which, "when combined in combinations of one or more, certainly could be highly volatile."
Police declined to give details of the likely target of the attack, but Victoria state police chief Christine Nixon said that next year's Commonwealth Games, to be held in Melbourne, were not a target.
"It's the largest operation of counterterrorism that's ever been conducted in this country and its taken us a long period of time," Nixon said on television.
"We believe that they were planning an operation and we weren't exactly sure when — nor more importantly what — they planned to damage or do harm to and so it was a point when we had sufficient evidence we were able then to move which is what happened this morning," Nixon added.
Melbourne lawyer Rob Stary said he represented eight of the suspects arrested in the city.
He said one of those arrested in Melbourne was outspoken radical Muslim cleric Abu Bakr, an Algerian-Australian who in the past has called al Qaeda mastermind Osama bin Laden a "great man." Abu Bakr leads a fundamentalist Islamic group in the southern city of Melbourne where he has lived since 1989.