Australian authorities said Wednesday they had seized explosives stored in a caravan in greater Sydney possibly intended for a "mass casualty" anti-Semitic attack.

More than 100 officers were investigating after the discovery 10 days ago in the semi-rural suburb of Dural, police said.

"That caravan contained explosives and some indication that those explosives might be used in some form of anti-Semitic attack," New South Wales police deputy commissioner David Hudson told a news conference.

Police made arrests "on the periphery of this job", he said, without giving further details.

They were also seeking information from anyone who saw the caravan parked in Dural, about 36 kilometres (22 miles) northwest of central Sydney.

The explosives were a brand called Powergel, which is used in the mining industry, and had enough force to create a 40-meter (130-foot) blast zone.

"We understand the concern from the Jewish community and we take all these threats exceptionally seriously," Hudson added.

A joint counter-terrorism team comprising state and federal police alongside Australia's intelligence service was investigating.

But the matter had not been declared a "terrorist incident", a designation that would give police additional powers and resources if needed, Hudson said.

Police believed they had recovered all of the explosives and mitigated any risk but could not say it had been eliminated.

Investigators were looking into whether the explosives were intended to be used or whether they were left to be found by police, Hudson said.

New South Wales Premier Chris Minns said the full resources of the government were being deployed.

"This is the discovery of a potential mass casualty event. There is only way of calling it out, and that is terrorism," he told reporters.

"This would strike terror into the community, particularly the Jewish community."

Hudson said the discovery of the explosives represented an escalation in a recent spate of anti-Semitic attacks.

Vandals have in past weeks torched a Sydney childcare centre, set cars ablaze in largely Jewish neighbourhoods and splashed inner-city synagogues with red paint and graffiti. 

Masked arsonists firebombed a synagogue in the city of Melbourne in December.