Israeli police have arrested eight people, aged between 16 and 21, who are charged with carrying out attacks against foreigners, gay people and religious Jews, the BBC reported.
Searches in their homes in the town of Petah Tikva have yielded Nazi uniforms, portraits of Hitler, weapons and explosives.
The arrests follow a year-long investigation, which began after a synagogue was defaced with Nazi graffiti.
All of the suspects have migrated to Israel from the Soviet Union under the law that allows anyone with at least one Jewish grandparent to become a citizen.
"It is difficult to believe that Nazi ideology sympathisers can exist in Israel, but it is a fact," Revital Almog, the police official who led the investigation, was quoted as saying.
The state of Israel was founded in the aftermath of World War II, when Nazis and their sympathisers killed millions of Jews in the Holocaust.