Christian and Tyler Toro, both 27, pleaded not guilty and were remanded into custody, charged over stockpiling explosive materials and manufacturing destructive devices in their Bronx home.
At least two students from a Harlem school had visited the home, where Christian paid them $50 an hour to break up fireworks and extract their powder into containers, prosecutors said.
"There is no imminent threat directed at New York City at this time," Mayor Bill de Blasio told a nighttime news conference.
The investigation began with a December 4, 2017 bomb threat against the high school in Harlem, after which one student was arrested and Christian Toro, a teacher at the school, resigned.
When Tyler returned his brother's work laptop, staff discovered it contained instructions for manufacturing explosive devices.
In a search of the brothers' shared bedroom, officials said they impounded 20 pounds (nine kilos) of iron oxide, five pounds of aluminum powder, five pounds of potassium nitrate, a jar containing explosive powder and a cardboard box of firecrackers.
Police said the full meaning of the materials was still unclear.
Both brothers are charged with unlawfully manufacturing a destructive device, which carries a maximum sentence of 10 years in prison.
Christian is also charged with distributing explosive materials to a minor, also punishable by up to 10 years.
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