National Police spokesman Boy Rafli Amar said people living within a 300-metre radius of the boarding house that was raided were evacuated. Police explosive experts were at the scene.
He said two men and one woman were arrested. The bomb was encased in a rice cooker.
Amar said the three who were arrested are suspected to be part of a militant network linked to a bomb-making lab raided last month in West Java province.
Umar Surya Fana, the police chief of Bekasi, a Jakarta satellite city where the evacuated neighbourhood is located, said two of the suspects were arrested shortly after leaving the boarding house where they stored the bomb. A third was arrested in the boarding house.
Fana said the militants were planning to bomb the presidential palace.
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