The pair, from Kosovo, are believed to have been planning an attack in the busy shopping district of Oberhausen, northwest Germany.
Essen police said: “The 28 and 31-year-old brothers born in Kosovo are suspected of having prepared a possible attack in the shopping centre in Oberhausen.”
The two terror suspects were captured early on Friday morning after a raid on a property where they were living.
Authorities are said to be finding out “how far preparations had been made and whether other persons were involved”.
Fire brigades and other emergency services were rushed to the area to be on standby.
Security forces scoured houses and vehicles in the Duisburg, Marxlohe and Bruckhausen neighbourhoods.
The pair were arrested in the German city of Duisburg, just nine miles away from Oberhausen.
The plotted attack is believed to have been targeted at the CentrO shopping centre, according to the Essen police Twitter account.