Italian police on Friday arrested 18 people in what they called a "vast" operation against a group allegedly inspired by the Al Qaeda and foiled an attack on the Vatican.
All those arrested were Pakistanis and Afghans, police said.
Those arrested were plotting an attack against the Vatican, police said citing wiretap evidence.
A Pakistani citizen arrived in Italy in 2010 with the alleged intention of carrying out a suicide bombing for the group, investigators said.
The suspect was immediately identified by Italy's anti-terrorism DIGOS police branch but the cell managed to get him out of the country as police searched for him, according to investigators.
The Vatican was aware of an alleged terrorist plot against it in 2010 (during the papacy of Benedict XVI) but had not learned of any subsequent threats, its spokesman Federico Lombardi said on Friday.
The group was based on the island of Sardinia and was also plotting attacks against the Pakistan government and US forces in Afghanistan, according to police.
Most of the arrests were made in Sardinia but the operation covered seven Italian provinces, police said.
Some of the those arrested are alleged to be responsible for terrorist attacks in Pakistan, including an attack in 2009 on a market in the northwest frontier city of Peshawar that killed more than 100 people, according to the police.
The alleged mastermind was among the 18 people arrested, police said. The man is an imam (Islamic cleric) in the northern Italian city of Bergamo, where he was arrested, according to police.
The alleged terror group's spiritual leader, the imam collected money from Afghans and Pakistanis in the Bergamo area, purportedly for religious purposes.
The cash was intended to fund terrorist attacks in Pakistan and Afghanistan, police said.
Money was sent to Pakistan by members of the group, mainly through the trust-based transfer system known as hawala in order to avoid Italy's currency control regulations, according to police.
The group was based in the Sardinian coastal resort of Olbia and was coordinated by a Pakistani builder, police said.
It supported the "armed struggle against the West", and wanted to incite a popular uprising against the Pakistani government so it would stop its anti-Taliban operations and its backing of remaining US forces in Afghanistan, according to investigators.
The alleged group members planned to travel to Pakistan and Afghanistan to carry out terrorist attacks before returning to Italy, investigators said.
Besides plotting attacks in Pakistan and Afghanistan, the suspects smuggled migrants from Pakistan and Afghanistan to Europe, police said.
The suspects supplied the migrants with fake work contracts or passed them off as refugees seeking asylum with forged documents giving their status as victims of religious or ethnic persecution. The group also helped them move to northern Europe, police said.
Following the report, the Pakistan foreign office in Islamabad said that its embassy in Rome was in contact with the Italian government to get details regarding the arrest of the suspected terrorists.
In a statement issued on its Twitter page, Pakistan foreign office spokesperson Tasneem Aslam said that the embassy was also inquiring about the nationalities of the terrorists.
