Tow truck driver Everitt Aaron Jameson, 26, was planning to target the city's busy Pier 39 tourist spot, according to an affidavit submitted by FBI Special Agent Christopher McKinney.
The suspect outlined to undercover agents how he wanted to use explosives to target crowds at the pier between December 18 and 25 because "Christmas was the perfect day to commit the attack."
Jameson professed not to need an escape plan as he was "ready to die," according to the document.
The suspect's home in Modesto, California, was raided by FBI agents on Wednesday, where they allegedly found his last will and testament along with several weapons and ammunition.
Jameson attended basic training with the Marine Corps in 2009 and graduated with a "sharpshooter" rifle qualification, according to the FBI, but was discharged after failing to disclose a history of asthma.
According to McKinney, Jameson selected Pier 39 because "he had been there before and knew it was a heavily crowded area."
"Jameson explained that he also desired to use explosives and described a plan in which explosives could 'tunnel' or 'funnel' people into a location where Jameson could inflict casualties," McKinney stated.
The suspect inadvertently revealed his plans to an undercover FBI agent he believed to be a senior leader of the Islamic State group, according to the court document.
Jameson said the US needed "another attack like New York or San Bernardino," adding that he wanted to use vehicles and firearms to carry out an attack.
"Today, our incredible law enforcement officers have once again helped thwart an alleged plot to kill Americans," Attorney General Jeff Sessions said in a statement.
"The threat from radical Islamic terrorism is real -- and it is serious -- but the American people can be assured that the Department of Justice remains vigilant in protecting our homeland," he added.
According to the criminal complaint, Jameson "has espoused radical jihadi beliefs, including authoring social media posts that are supportive of terrorism."
He had voiced support for the October 31 attack in New York in which a jihadist drove a pick-up truck into a crowded bike path, killing eight people, said the FBI, and was active on Facebook, "liking" pro-IS posts.
He "loved" a post on November 29 of a terror propaganda image of Santa Claus standing in New York with a box of dynamite.
He was charged in the Eastern District Court of California with attempting to provide material support to a designated foreign terrorist organization and faces up to 20 years in prison if convicted.
"He was under surveillance by law enforcement, and the public was never in imminent danger," the FBI said in a statement.
