Officials said the arrests capped a six-month investigation and stopped a massive - and imminent - plan to bomb targets that included Frankfort Airport and the U.S. Ramstein Air Base, the transit point for thousands of American troops in Iraq and Afghanistan, reports CBS News foreign correspondent Richard Roth.
Prosecutors said the suspects - two German converts and a Turkish citizen sharing a "profound hatred of U.S. citizens" - had military-style detonators and enough material, including hydrogen peroxide, to make bombs more powerful than those that killed 191 people in Madrid in 2004 and 52 commuters in London two years ago.
German Federal Prosecutor Monika Harms said the suspects arrested Tuesday were aiming at institutions and establishments frequented by Americans in Germany, including discos, pubs and airports. Her office said the plan was to set off car bombs.
"We were able to succeed in recognizing and preventing the most serious and massive bombings," Harms said at a news conference.
A judge has ordered that the three suspects be held pending trial.
The three suspects first came to the attention of authorities because they had been caught observing a U.S. military facility in Hanau, near Frankfurt, at the end of 2006, officials said.
Roughly two million Turks lived in Germany as of 2004 - and the area of the arrests holds the country's largest Turkish population, reports CBSNews.com's Christine Lagorio from Berlin.
All three had undergone training at camps in Pakistan run by the Islamic Jihad Union, and had formed a German cell of the group, which officials said was influenced by al Qaeda.
FBI Special Agent Richard Kolko told CBS News Wednesday that U.S. officials "see no imminent threat to the U.S. domestically following these arrests."
Kolko added that no further information on the case would come from U.S. officials.
The Islamic Jihad Union was described as a Sunni Muslim group based in Central Asia that was an offshoot of the Islamic Movement of Uzbekistan, an extremist group with origins in that country.
"The group, which is influenced by al Qaeda, set up a German cell in winter of 2006 with the goal of finding recruits here to carry out attacks," Harms said.
The three had no steady work and were collecting unemployment benefits while their main occupation was the plot, officials said.
"This group distinguishes itself through its profound hatred of U.S. citizens," Joerg Ziercke, head of the Federal Crime Office, Germany's equivalent of the FBI, said at the news conference.
A third suspect fled through a bathroom window but was apprehended about 300 yards away.
The arrests come a day after Denmark's intelligence service linked to leading al Qaeda figures in anti-terror raids in the Danish capital, according to the head of the agency.
The men, between ages 19 and 29, were suspected of preparing a terror act involving explosives, said Jakob Scharf, the head of Denmark's PET intelligence service.
German authorities gave no indication early Wednesday of any links to the arrests in Denmark. The two countries share a short border where northern Germany meets the south of Denmark.
Wolfgang Bosbach, a top legislator for Chancellor Angela Merkel's Christian Democrats, said that "the suspects had been under observation by security officials for a long time"
"Consequently, we know without any doubt that they were planning attacks that would have had considerable consequences," he told N24 television, adding that the three had acquired chemicals for the plot.
Bosbach said an attack could have occurred "in a few days" and pointed out the anniversary of the Sept. 11, 2001, terror attacks next week, as well as deliberations by the German parliament in the next few weeks over whether to extend its troop mandates in Afghanistan.
"We are in a highly sensitive period," he said.
On March 10, 2007, the Global Islamic Media Front - know for producing a high volume of terrorist propaganda - released a video demanding the governments of Germany and Austria withdraw their troops from Afghanistan. The video, found in March by CBS News, said if the demand was not met the countries would face the threat of being attacked at home.
"Wise people do not destroy their security by their own hands," the statement read in the video said.
Meanwhile, the European Union's top justice official said Wednesday the threat of a terror attack remained high in the 27-nation bloc.
EU Justice and Home Affairs Commissioner Franco Frattini said the EU executive would push ahead with plans to set up an EU-wide airline passenger data recording system modeled on a system developed by the United States, despite privacy concerns voiced by some EU parliamentarians.
"It's a useful tool to protect our citizens, who deserve the same protection as U.S. citizens," Frattini told the European Parliament.
Other measures in the works include a plan to set up an EU-wide explosive database to provide an early warning system on lost or stolen explosives that could end up in the hands of terror groups, and new provisions to deal with the misuse of the Internet by terrorists, Frattini said.
"The threat of new terror attacks continues to be high," Frattini said, citing Spain, Italy, Belgium, Britain and Germany as countries where the risk has been the highest.
Germany, which did not send troops to Iraq, has been spared terrorist attacks like the train and subway bombings in Madrid and London - although its involvement in the attempt to stabilize Afghanistan has led to fears it might be targeted.
In July 2006 two gas bombs were placed on commuter trains but did not explode. Officials said that attack was motivated by anger over cartoons portraying the Prophet Muhammad in a Danish newspaper. Several suspects are on trial in Lebanon, and a Lebanese man has been charged in Germany.