Police in Milan and London arrested four Tunisians who allegedly provided logistical and financial support to an al-Qaida affiliate.
Three men were picked up on terrorism charges in Milan and one was arrested at his home in north London, said police in both cities.
The group allegedly recruited extremists that were sent to terrorist training camps in Afghanistan before joining militants in Algeria, Tunisia, Chechnya, Bosnia or Afghanistan itself, Italian police said in a statement.
The cell, allegedly part of the Salafist Group for Call and Combat or GSPC, also planned attacks in Italy, said Col. Domenico Grimaldi, the police official who led the investigation.
"There were also plans for Italy, but fortunately they were not carried out," he told SKY TG24 TV. "However, we know that other members of the group were killed in Algeria and Tunisia."
Grimaldi did not elaborate, but the police statement said the Milan-based cell was connected to the April 11 Algiers attacks as well as a deadly shootout between police and Islamist gunmen tied to the GSPC in January in Tunisia.
Algeria's GSPC, which changed its name to al-Qaida in Islamic North Africa when it announced its alliance with al-Qaida in January, is on the U.S. list of terrorist organizations. The group claimed responsibility for the twin suicide bombings in Algiers that killed 30 people.
In its recruiting activities, the Milan cell provided false documents, as well as apartments, cars and communication devices registered under false names, the Italians said in the statement. Police also tracked a flow of money of tens of thousand of euros (dollars) destined for Afghanistan through Europe, North Africa and the Middle East.