Acting on a tip-off, the Crime Investigation Agency (CIA) and an intelligence agency raided a flat in Laiqatabad slum at around midnight and arrested the seven men, officials said.
Seven suicide vests, guns, scores of bullets, explosives, CDs, computers, and maps of important locations and installations were recovered from the men.
Officials said the arrested men belonged to the banned Tehrik-e-Taliban Pakistan (TTP) and had been tasked to target offices of law enforcement agencies in Lahore. They were moved to an undisclosed location for questioning.
The dealer told police the suspects told him that they were students. The identity documents they submitted to him turned out to be fake.
In a separate development, Railway Police seized a bag containing arms and bullets from a passenger on the Karachi-bound Millat Express yesterday. The man, identified as Rais Ahmed of Sargodha district in Punjab, was arrested.
Police found the weapons while checking the train with a sniffer dog at Faisalabad station, some 150 km from Lahore, the capital of Punjab.