Police have thwarted a terrorist plot to bring down a plane, arresting four men in raids on homes in Sydney's suburbs.
Prime minister Malcolm Turnbull said security had been increased at Sydney Airport since Thursday because of the plot.
The measures were extended to all major international and domestic terminals around Australia overnight.
"I can report that there has been a major joint counter-terrorism operation to disrupt a terrorist plot to bring down an airplane," Mr Turnbull said.
"The operation is continuing."
Australian Federal Police commissioner Andrew Colivn said details were scant on the specifics of the attack, the location and timing.
"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 improvised devise," he said.
"We are investigating information indicating the aviation industry was potentially a target of that attack."
Mr Turnbull advised travellers in Australia to arrive at airports earlier than usual - two hours before departure - to allow for extra security screening, and minimise carry-on baggage.
Justice minister Michael Keenan said the plot was the 13th significant threat disrupted by police since Australia's terror threat level was elevated in 2014.
Five plots have been executed.
"The primary threat to Australia still remains lone actors, but the events overnight remind us that there is still the ability for people to have sophisticated plots and sophisticated attacks still remain a real threat," Mr Keenan said.
"In light of this information, it's very important that everyone in Australia remains vigilant."
The operation was carried out by the Australian Federal Police, New South Wales state police and the Australian Security Intelligence Organisation, the country's main domestic spy agency.
The investigation could continue for days, Mr Colvin said.
Seven Network television said 40 riot squad officers wearing gas masks stormed an inner-Sydney house before an explosives team found a suspicious device.
A woman led from a raid by police with her head covered told Nine Network Television: "I love Australia."
Deakin University security expert Greg Barton said the first plot to target aircraft in Australia, the highest aspiration of many extremists, was a "pretty big threshold moment".
The plotters were apparently making a peroxide-based explosive device rather than using nitrate-based chemicals that can be detected by airport security swab tests, he said.
Manchester Arena bomber Salman Abedi used such a peroxide-based explosive, triacetone triperoxide, better known as TATP, to kill 22 concert-goers in Britain on May 22.
"TATP's called Mother of Satan because it often kills the bomb maker because it's very unstable as it's mixed," Mr Barton said.
"But if it's mixed well, it can be very potent and a small amount can be enough to bring an aircraft down if it's done very, very expertly."
He said the plan most likely was to take the explosive on board in carry-on luggage unless there was a baggage handler involved who could ensure that a stowed bomb exploded near the fuselage where it would be most damaging.
"The speculation is that the bombers would like to put it in carry-on luggage so they can be sure of getting it placed near the fuselage skin," Mr Barton said, adding however that putting something in a suitcase was "a lottery whether it ends up near the outside of the luggage hold or packed near the middle".
There was no evidence that airport security had been compromised, Mr Colvin said.
"We believe it's Islamic-inspired terrorism," he said, when asked if the Islamic State terror group was behind the plot.