Two men have been arrested on suspicion of terrorism and explosives offences and more than 100 homes evacuated in the town that is home to Britain's electronic surveillance centre, police said on Saturday.
The local men, aged 52 and 31, were arrested in two raids in Cheltenham, a spa town in southwest England, on Friday, with the older man initially arrested over explosives offences.
Both were then arrested on suspicion of preparing or instigating a terrorist act, and are in police custody.
"This relates to examination of the items found in a garage," police said in a statement.
More than 100 homes were cordoned off after being evacuated overnight in connection with the finds, and residents were warned that an explosives disposal team might carry out a "controlled disruption" at the site.
Britain's government communications headquarters, GCHQ, is based in Cheltenham, where thousands of workers gather intelligence through intercepting electronic communications.
Mainly based in a purpose-built development known as the "doughnut", they also defend the country's own information and communications systems from hackers.