"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," Australian Prime Minister Malcolm Turnbull told reporters.
Additional security has been put in place at all major domestic and international airports, with travellers told to arrive two hours early for screenings, he added.
Officials did not specify if the alleged plot targeted a domestic or international flight, but Sydney's Daily Telegraph reported that a local route had been the objective.
The four men, arrested in a series of raids across Sydney on Saturday, were allegedly linked to an "Islamic-inspired" plot, Australian Federal Police Commissioner Andrew Colvin said.
"In recent days, law enforcement has been 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.
But he added that police did not yet have "a great deal of information on the specific attack, the location, date or time", with the investigation expected to be "very long and protracted".
Canberra lifted the alert level in September 2014 and introduced new national security laws amid rising concerns over attacks by individuals inspired by organisations such as ISIS.
Counter-terrorism police have also made a string of arrests since late 2014 across the nation and say they have prevented 12 terror attacks on home soil, before the latest announcement, in the past few years.
But several attacks have taken place, including a cafe siege in 2014 where two hostages were killed and the murder of a Sydney police employee in 2015 by a 15-year-old boy.
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