Two teenagers will appear before court today after being charged by counter-terrorism police in Sydney's south-west overnight with selling weapons and drugs.

Sorry, this video has expired NSW Deputy Police Commissioner David Hudson said the men were known to police

The two 18-year-olds were arrested at about 6:15pm yesterday after raids on properties at Merrylands and Toongabbie, police said.

The two men have been charged with 17 offences each, including selling guns, supplying ammunition and supplying drugs in a commercial quantity.

NSW Deputy Police Commissioner David Hudson said police had seized a variety of weapons including three pistols, two shortened-long-arm and three long-arm firearms, cash and a large amount of illicit drugs including cocaine.

Police said the teenagers thought the guns they were selling would be used for criminal purposes. ( AAP )

He said the teenagers were under the impression the guns they were selling would be used for criminal purposes.

"For the past two months that particular strike force has been involved in the purchase of illicit firearms and other illicit commodities from targets we will suggest are closely linked to those suspected to be involved in terrorist activities," he said.

"They [the teenagers] thought they were supplying them for both criminal activity and perhaps other motives as well."

Arrested men known to police

Deputy Commissioner Hudson said the arrested men were known to police and the properties raided had previously "come under notice" for illegal activity.

"We do monitor a large number of individuals within our community that we have suspicions over in relation to terrorist activity," he said.

"These targets came up on the periphery of that, with an opportunity there to obtain firearms that they had proffered for sale.

"We took that opportunity to try to remove [the firearms] from the streets before they could fall into hands in either the terrorism or criminal environment where they could do damage to the community."

The investigation involved counter-terrorism officers from the Australian Federal Police, the Australian Security Intelligence Organisation and the New South Wales Crime Commission.

Both men have been refused bail and are expected to appear before Parramatta Bail Court today.

Mr Hudson said the terror threat level in NSW and Australia remained at probable.