The cell was allegedly linked to Iran's Revolutionary Guard and Lebanon's Tehran-backed Hezbollah militia and planning to carry out a "series of dangerous bombings" on the tiny Sunni-ruled kingdom, an interior ministry statement said.
Members of the "secret terrorist organisation" have been identified and many arrested, said the statement on the official BNA news agency, adding that others remain at large.
Among those arrested were 33-year-old twins Ali and Mohammed Fakhrawi identified as leaders of the group.
It is also linked to suspects involved a July 28 bombing that killed two policemen and wounded six others.
Al-Ashtar Brigade, as well as Lebanese Shiite movement Hezbollah, are on Bahrain's list of "terrorist groups."
The twins have travelled to Iran on several occasions to obtain financial and logistical support, relying on their relations with "terrorist elements" that have strong ties with the Revolutionary Guard and Hezbollah, the statement said.
Ali Fakhro and two other suspects also met in 2012 with Hezbollah chief Hassan Nasrallah and his deputy who offered them "USD 20,000 (18,520 euros) in support of their organisation," Bahrain said.
Bahrain frequently accuses Tehran of backing the unrest.
Today's announcement comes as tensions widened between Saudi Arabia and Iran after protesters torched the kingdom's diplomatic missions in the Islamic republic following the Saturday execution of Shiite cleric Nimr al-Nimr.
Riyadh cut diplomatic ties with Tehran in protest at the attacks on Sunday and has severed air links with Iran.
Some of its allies among Sunni Arab states followed suit, with Bahrain and Sudan breaking off ties and the United Arab Emirates downgrading relations.
Kuwait said it was withdrawing its envoy while Oman and Qatar have condemned the attacks without taking any measures.
Saudi Arabia accused Iran Saturday of sponsoring "terrorism" recalling Iran-linked cells that have been uncovered smuggling explosives and arms to Bahrain and Kuwait.
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