(BBC) The eight suspects, aged 16-21, are all Israeli citizens from the former Soviet Union. They were arrested a month ago, but the news only emerged on Saturday.
Police say searches of their homes yielded Nazi uniforms, portraits of Adolf Hitler, knives, guns and TNT.
Israel was founded in the wake of the Nazi Holocaust in which millions died.
The arrests follow a year-long inquiry which began after a synagogue in Petah Tikva, a city east of Tel Aviv, was desecrated with graffiti of Nazi swastikas and the name of Nazi leader Adolf Hitler.
Prime Minister Ehud Olmert expressed his horror at what he called "violence for the sake of violence."
"I am sure that there is not a person in Israel who can remain indifferent to these scenes, which indicate that we too as a society have failed in the education of these youths," he said.
Tattoos
The eight accused, who include the group's alleged leader, are all from Petah Tikva.
The gang members sported tattoos popular with white supremacists - including the number 88, code for Heil Hitler because "H" is the eighth letter of the alphabet.