Officials say the men plotted to carry out a mission "just as good or greater" than the September 11, 2001 terror attacks.
The seven men - five Americans, one Haitian and one other foreigner – have been detained after their appearance in a Miami court, pending formal charges.
Prosecutors allege the men face four terrorism conspiracy counts, including a plot to carry out attacks on the FBI regional headquarters and other buildings in Miami.
But US Attorney General Alberto Gonzales told a news conference in Washington that the plotting of the seven never went beyond the earliest planning stages.
“There was no immediate threat," Gonzales said, acknowledging the defendants never had any contact with al-Qaeda and did not have any weapons. "They didn't have the materials required."
Six of the men were detained in Miami while the seventh man was arrested in Atlanta, Georgia.
FBI involved in capture
The men were caught after approaching an FBI undercover agent who they believed was an Al-Qaeda member, prosecutors said.
According to the charges, the leader of the group asked the undercover agent for weapons, equipment and money to finance a "war against the US government".
The seven men had sworn allegiance to Al-Qaeda, the charges said, adding that the group had pledged to "kill all the devils we can".
According to the charges, the Miami group, which called itself the "Seas of David", had studied the 442-metre-high Sears Tower and other targets.
The charges said that its alleged leader, Narseal Batiste, recruited individuals for an operation "which included a plot to destroy by explosives the Sears Tower".
Batiste told the undercover agent that he was "organizing a mission to build an 'Islamic Army' in order to wage jihad."
He requested money, boots, uniforms, machine guns, radios and vehicles, but officials said that no weapons or explosives had been seized.
While acknowledging that the plot was "more aspirational than operational", FBI deputy director John Pistole called the arrests in Miami an "important step forward in the war on terrorism here in the United States".
Men slept in warehouse
The arrests took place in Liberty City, a poor neighborhood in northern Miami.
Residents said the men who were arrested appeared to be part of a cult of at least a dozen people, sleeping in a warehouse, dressing in military-like clothing and doing exercises.
CNN interviewed a member of the organization, ‘Brother Cory’, who repeatedly denied the Seas of David was a terrorist group or that it had any ties to Al-Qaeda.
"We are not terrorists. ... We study and believe in the word of God. This is a place where we worship," Cory said.
The Council on American-Islamic Relations, a leading Muslim group in the United States, urged special protection for mosques in the United States in case of reprisals after the arrests.
Arrests ‘a show’: relatives
Relatives of the seven arrested men have dismissed the arrests as a "show" designed to frighten US citizens.
”It's all a show, they're scaring people, there's nothing to be scared at all," said Marlene Phanor, the sister of Stanley Grant Phanor, 31, one of the men arrested.
”Those guys don't know anything about no bomb threats, any violence, anything, if there was anything in process is this guy right here, the leader," she said.
’Domestic terrorists’ threat
Gonzales said that "domestic terrorists" could become as big a threat as Al-Qaeda.
He said there was a threat from small, improvised groups within the United States.
”The convergence of globalization and technology has created a new brand of terrorism," he said.
"Today, terrorist threats may come from smaller, more loosely defined cells who are not affiliated with Al-Qaeda but who are inspired by a violent jihadist message.”
”And left unchecked, these homegrown terrorists may prove to be as dangerous as groups like Al-Qaeda."