According to DPA information, one man arrested was a 66-year-old "Reichsbürger" - someone who does not recognize the government or laws of Germany. The suspect, from Schwetzingen near Heidelberg, is believed to be the leader of the group that is suspected of plotting attacks.
The two who were detained are accused of forming a terrorist organization that was planning attacks on Jewish people, police and asylum seekers, though prosecutors said there was not yet evidence of concrete plans.
Around 200 police officers were deployed early Wednesday morning to search 12 apartments and other buildings connected to the group in Lower Saxony, Brandenburg, Rhineland-Palatinate, Berlin, Saxony-Anhalt and Baden-Württemberg.
In total six people were targeted in the raids, ranging in age from 35 to 66. A seventh man reportedly helped support the group, which mainly connected with one another through social media. They have reportedly been planning attacks since early last year.
The main 66-year-old suspect, according to DPA security sources, called himself a "Celtic druid". Investigators are still looking into how closely the group is connected to the Reichsbürger scene.
The goal of the police raids was to gather further evidence that the group has an actual structure, as well as to build a potential criminal case.
Baden-Württemberg interior minister Thomas Strobl said that the operation was also aimed at Reichsbürger.
"With today's operations and measures, our nation of law has shown that it can defend itself against - and have a sharp eye toward - right-wing extremism, right-wing violence and right-wing hatred," Strobl said.
People who are part of the Reichsbürger scene assert that the German Reich, or even Prussia, still exists, with some groups establishing their own "government". German intelligence considers a number of Reichsbürger to be part of the right-wing extremist scene and has been monitoring them.
The movement attracted more attention in October after a self-declared Reichsbürger shot and killed an officer during a police raid on his home.
On Wednesday the head of Germany's domestic security agency, the BfV, said that there are an estimated 10,000 Reichsbürger in the country.
BfV president Hans-Georg Maaßen told DPA that about 500 to 600 of them are believed to also be right-wing extremists.
"The Reichsbürger movement is working to be more appealing and has gained further new supporters," Maaßen said.
He also noted that members of the movement are not all the same.
"Not all of them refer to the German Reich. Frequently we have found people who want to found their own nation or community."
The BfV is now concerned with the "significant willingness to commit violence and growing aggressiveness of the scene," Maaßen added.
Note: This article has been updated with the correct age of the main suspect.