Australia has foiled an Islamist-inspired "terrorist plot" to bring down an airplane with an improvised explosive, authorities said Sunday, after four people were arrested in raids across Sydney.

Prime Minister Malcolm Turnbull said the plot appeared to be "elaborate" rather than planned by a lone wolf, as security was beefed up at major domestic and international airports across the nation.

"I can report last night that there has been a major joint counter-terrorism operation to disrupt a terrorist plot to bring down an airplane," Mr Turnbull told reporters.

"The threat of terrorism is very real. The disruption operation, the efforts overnight have been very effective but there's more work to do."

Officials did not specify if the alleged plot involved a domestic or international flight, but Sydney's Daily Telegraph reported that a local route had been the objective.

Australian Federal Police Commissioner Andrew Colvin described the plot as "Islamic-inspired", saying four men had been arrested in a series of raids across Sydney on Saturday.

"We do believe it is Islamic-inspired terrorism. Exactly what is behind this is something we need to investigate fully," he said.

Mr Colvin added that local authorities had received "credible information from partner agencies" about the claims but would not elaborate further or state if the men were on any watch list.

"In recent days, law enforcement has become aware of information that suggested some people in Sydney were planning to commit a terrorist attack using an IED (improvised explosive device)," he told reporters.

He added that several items "of great interest to police" had been seized in the raids but police did not yet have a great deal of information on the specific attack, the location, date or time. He said the investigation was expected to be "very long and protracted".

"However, we're investigating information indicating the aviation industry was potentially a target of that attack."

Mr Colvin would not provide further details, but the Australian Broadcasting Corporation said police found items that could be used to make a homemade bomb in one of the raided homes Saturday.

Authorities believed they planned to smuggle the device onto a plane to blow it up, the ABC added.

Source: AFP