Police said a large knife and an IS-style flag were found in the raided house
Police in the Australian city of Sydney have charged two men with planning to carry out an imminent attack.
The pair, aged 24 and 25, were arrested in a raid in the western suburb of Fairfield on Tuesday.
Details of the alleged plot are not known, but police say a hunting knife, an Islamic State (IS) flag and a video describing an attack were seized.
Australia, which has joined the coalition fighting IS in Iraq, raised its domestic terror alert last year.
The move was a response to growing concern over the impact of militant conflicts in Iraq and Syria.
Sydney is also on alert after a siege at a cafe in the city in December which left two hostages and the gunman dead.
Prime Minister Tony Abbott said the latest arrests were a sign that the IS "death cult" was "reaching out all around the world, including here in Australia, and regrettably there are people in this country who are susceptible to these incitements to extremism and even terrorism".
New South Wales Deputy Police Commissioner Catherine Burn said police believe the men arrested on Tuesday were preparing to carry out an attack that day.
The video found in the raided home "depicted a man talking about carrying out an attack", said DC Burn, adding that the arrests were "indicative of the threat" the security agencies now have to deal with.
No details have been given of the alleged plot, but she said the threat was "consistent with the messaging coming out of IS".
The pair, named in court documents as Omar Al-Kutobi and Mohammad Kiad, were not previously known by police and counter-terrorism officers were only aware of them when they received information on Tuesday, forcing them to act immediately, she said.
They have been charged with undertaking acts in preparation or planning for a terrorist act. They chose not to appear at an initial hearing on Wednesday, where bail was formally refused.
'Catastrophe prevented'
New South Wales Premier Mike Baird urged vigilance and said the alleged plot was "beyond disturbing".
The cafe siege in December caused an outpouring of public grief and anger but has not been classed as a terrorist incident
"Certainly something catastrophic was avoided yesterday and for that we should be very thankful," he said.
Last September, Australia conducted its biggest counter-terrorism raid in Sydney, in response to intercepted intelligence about an alleged plots.
About a dozen people have been arrested overall, including one man accused of plotting to behead members of the public in Sydney and Brisbane.
Many of those targeted in the raids are alleged to be linked to or supportive of IS, or are accused of helping people travel overseas to fight with extremists.
In October, Australia joined the US-led military action against IS in Iraq, with Mr Abbott saying IS was a "death cult" that must be stopped. But critics say this has increased the risk of attacks on Australian soil.
The Australian government believes at least 60 Australians are fighting with terror groups in the Middle East and at least 100 are actively supporting them from home.
December's siege at the Sydney cafe was carried out by a man known to have extremist Islamist views, who made hostages hold up a black Islamist flag. But investigators do not believe he had links to IS or other militant groups.