Police found explosives in a Paris department store on Tuesday after a tip-off from a group demanding the withdrawal of French troops from Afghanistan.
The group called itself the Afghan Revolutionary Front and was not previously known to the security services.
The five sticks of explosives were not primed and police said there was no danger of a detonation.
French President Nicolas Sarkozy, speaking in the eastern French city of Strasbourg, urged caution but said France would not negotiate with terrorists.
"At this point in time I would call on everyone to be very prudent and very measured," he said.
The tip-off was sent by letter to a French news agency, warning that several bombs had been planted in the Printemps department store on the Boulevard Haussmann, which is normally packed with Christmas shoppers at this time of year.
Police said there was no mention of Islam in the letter, adding that recent attacks in Europe tied to Iraq and Afghanistan had been launched without specific prior warning.
The letter, posted from Paris on Dec. 15, said one of the devices was in the cistern of a lavatory on the third floor of the store, but did not say where the other bombs were hidden.
Police said their searches had uncovered explosives in lavatories on the third and second floor of the men's section of the huge Printemps store.
"The explosives had not been primed which indicates there was no risk of explosion," said Interior Minister Michele Alliot-Marie, adding that the material was "relatively old".
Troops in Afghanistan
France has more than 2,600 troops stationed in Afghanistan fighting Taliban forces. Last month, a militant group warned in a video aired on Al Arabia television that it would attack Paris if the French soldiers were not repatriated.
Ten French soldiers were killed in a Taliban attack in Afghanistan in August and a further two died there last month after a mine exploded.
France was hit by bomb attacks against stores, markets and underground metro stations several times during the 1980s and 1990s, with Algerian or Middle Eastern militants often claiming responsibility.
Since the Sept. 11 2001 attacks on the United States and France's participation in the U.S.-led war in Afghanistan, security officials have repeatedly said the country faced potential terrorist attacks.
The discovery of the explosives came at a particularly bad time for the French retail sector, which notches up a major chunk of its annual profits during pre-Christmas trading but is facing a downturn this year because of the financial crisis.
"The goal is to frighten people," saidValerie Plagnol, chief strategist at CM-CIC Securities. "Security will be boosted in stores, and sales could be affected."
Printemps is owned by the PPR retailer group. Its shares were up 3.37 percent by 1315 GMT.
Italian tourist Ilaria de Pasqua shrugged off the threat of potential attack after she was prevented from entering Printemps by the police cordon.
"There are lots of shops. I am going to go to Galeries Lafayette instead," she said.
(Additional reporting by Gerard Bon, Anna Willard and James Mackenzie; Editing by Timothy Heritage)