Tow truck driver Everitt Aaron Jameson, 26, was planning to target the city's busy Pier 39 tourist spot, according to an affidavit submitted by FBI Special Agent Christopher McKinney.
The suspect is said to have outlined to undercover agents how he wanted to use explosives to target crowds at the pier between December 18 and 25 because "Christmas was the perfect day to commit the attack."
Jameson professed not to need an escape plan as he was "ready to die," according to the document.
Jameson attended basic training with the Marine Corps in 2009 and graduated with a "sharpshooter" rifle qualification, according to the FBI, but was discharged after failing to disclose a history of asthma.
Also Read
According to McKinney, Jameson selected Pier 39 -- which gets around 10 million visitors a year -- because "he had been there before and knew it was a heavily crowded area."
"Jameson explained that he also desired to use explosives and described a plan in which explosives could 'tunnel' or 'funnel' people into a location where Jameson could inflict casualties," McKinney stated.
Jameson said the US needed "another attack like New York or San Bernardino," adding that he wanted to use vehicles and firearms to carry out an attack.
"Today, our incredible law enforcement officers have once again helped thwart an alleged plot to kill Americans," Attorney General Jeff Sessions said in a statement.
"The threat from radical Islamic terrorism is real -- and it is serious -- but the American people can be assured that the Department of Justice remains vigilant in protecting our homeland," he added.
He had voiced support for the October 31 attack in New York in which a jihadist drove a pick-up truck into a crowded bike path, killing eight people, said the FBI, and was active on Facebook, "liking" pro-IS posts.
He "loved" a post on November 29 of a propaganda image of Santa Claus standing in New York with a box of dynamite.
He was charged in the Eastern District Court of California with attempting to provide material support to a designated foreign terrorist organization and faces up to 20 years in prison if convicted.
Local newspaper the Merced Sun Star published a video interview with a man it identified as the suspect's father, Gordon Jameson, who described his son as a "the gentle, kind type of Muslim person" and said the FBI had got its facts wrong.
"I don't know too much about the case because the FBI isn't saying much to me but I know my son wouldn't harm nobody. He wouldn't do that to innocent people," he said.
Disclaimer: No Business Standard Journalist was involved in creation of this content