"A series of complex investigations led to the arrest and detention of ten suspects from the Lehava group, including senior members," Israeli police spokesman Luba Samri said.
"Lehava is an extremist organization which opposes integration with non-Jews as well as marriages between Jewish women and Arab men," she explained.
The group, she added, was "suspected of having carried out hate crimes and sponsored called inciting racist terrorist acts [against Arabs]."
She did not, however, disclose where the group members had been arrested.
The arrests came after scores of people protested in West Jerusalem earlier this week to demand that the Lehava organization be outlawed.
One day earlier, Israeli prosecutors charged three Lehava members with carrying out an arson attack last month on a classroom in a Jewish-Arab school in southern Jerusalem after the three had confessed to the charges.
Tension has been running high in the Palestinian territories and Israel due to repeated Israeli "violations" of the flashpoint Al-Aqsa Mosque compound.
The Israeli authorities briefly closed the Al-Aqsa Mosque compound in late October following the shooting of an extremist rabbi in West Jerusalem.
The closure of Al-Aqsa, along with the killing by Israeli police of a young Palestinian man suspected of shooting the rabbi, has prompted angry Palestinian protests in East Jerusalem.
For Muslims, Al-Aqsa represents the world's third holiest site. Jews, for their part, refer to the area as the "Temple Mount," claiming it was the site of two Jewish temples in ancient times.