By Tristana Moore
BBC News, Berlin
For months, the German authorities have said that the country faces a heightened threat of terrorist attack, and now it appears those warnings were based on fact.
Two of the suspects are German
According to the authorities, they have foiled what the security forces believe could have been a devastating bombing campaign here in Germany.
At a news conference, prosecutors confirmed three suspects had been arrested in a massive police operation.
The suspects, two German nationals and one Turkish man, are all members of an al-Qaeda-affiliated organisation known as the Islamic Jihad Union, which has roots in Uzbekistan.
The suspects appeared on Wednesday at the Federal Court of Justice in Karlsruhe and they remain in police custody.
German officials say the men, all in their 20s, had been planning a series of simultaneous car bomb attacks on a number of different targets, including American facilities in Germany, military bases, discos and pubs frequented by US citizens.
Another target is reported to have been Frankfurt airport, one of Europe's busiest air hubs.
The men were arrested after specialist officers stormed a flat in the village of Oberschledorn, in the state of North Rhine-Westphalia, on Tuesday at 1430 local time (1230 GMT).
The trio had been under surveillance for nine months
The suspects had allegedly stockpiled some 730 kg (1,600lb) of hydrogen peroxide, which can be used to make explosives.
The head of the Federal Crime Office, the BKA, Joerg Ziercke, said: "I assume that the goal of these attacks was to achieve the highest possible number of victims in Germany."
He added that the suspects were motivated by a "profound hatred of US citizens".
Prosecutors believe the explosives could have been capable of wreaking havoc on a huge scale and claiming hundreds of lives.
At a news conference, Germany's Federal Prosecutor, Monika Harms, said the arrests were the result of a long police investigation.
"We were able to succeed in recognising and preventing the most serious and massive bombings," she told media in Karlsruhe.
German officials say the men had been under police surveillance for the last nine months.
In Berlin, Interior Minister Wolfgang Schaeuble said Germany now faced what he described as a "concrete" threat of attack, and he paid tribute to the security forces.
Germany has 3,000 troops in Afghanistan
Chancellor Angela Merkel also thanked security officials for foiling the attack and said: "It shows for me that international co-operation is of decisive significance in the fight against terrorism."
With more than 3,000 troops based in Afghanistan, German ministers have repeatedly warned that Germany has become a target for attack.
After this latest police operation, security has now been stepped up at airports and other public buildings across the country.
Germans have been shocked to hear the news of the failed bomb plot and the story has dominated the headlines.