They detained 13 people on Wednesday, mostly in and around the southeastern town of Bamberg, and issued formal arrest warrants against three of them. They also confiscated a firearm and ammunition, other weapons and illegal Nazi propaganda and paraphernalia, police in the state of Bavaria said.
With extremist sentiments against asylum seekers at a peak, police suspected the "pyrotechnic devices," intended for delivery to the radicals, could have been used for the worst.
Thousands of weary refugees streaming in from perpetual war zones in the Middle East have received a warm welcome from most Germans, but radical groups have set fire to scores of refugee shelters.
"There could have been arson attacks planned against asylum seeker centers or similar places," Bavarian Interior Minister Joachim Herrmann told German public broadcaster ARD
of the fireworks. He was afraid that the explosives in the large shipment could be combined into more dangerous bombs.
Bamberg is home to a recently established high-profile refugee center.
The investigation into any possible plots by the group is ongoing, but with various attacks against asylum seeker shelters tallying more than 560 this year, according to ARD, police felt compelled to act.
Acute right-wing rage over asylum seekers has police and many citizens on edge in a society where it triggers horrifying memories of the Nazi era. A million people are expected to file for refugee status in Germany this year, and some politicians supporting them have received death threats.
Less than a week ago, a suspected right-wing extremist stabbed a candidate for senior mayor
in the city of Cologne. She survived severely injured and went on to win the election.
At gatherings of the Islamophobic group PEGIDA (Patriotic Europeans Against the Islamization of the West), speakers ranting against Muslim refugees and left-leaning politicians have recently crossed into what many have decried as embarrassingly open hate speech with allusions to Nazism.
Since early 2014, detectives had been observing the right-wing group to which the 11 men and two women who were detained belong. It is associated with an extremist party called The Right.
The group's members had shown an increased propensity to violence, Bavarian police said. They have been accused of assault and "crudeness violations," a softer form of assault, for which prosecutors in the city of Bamberg have already opened a case.