Three men were charged with plotting to attack President Barack Obama's campaign headquarters and lob Molotov cocktails at police as days of protest heated up ahead of a NATO summit.
Police on Saturday insisted there were "no imminent threats" to the leaders of more than 50 nations set to meet at the two-day summit in Chicago.
But they were out in force to monitor the boisterous -- but so far peaceful -- protests which spread through the city in the days leading up to the summit.
"The individuals we charged in this investigation are not peaceful protesters," state attorney Anita Alvarez told reporters.
"They are domestic terrorists who came to Chicago with an anarchist agenda to harm our police officers, intimidate our citizens and to attack their politically motivated targets."
The three "self proclaimed anarchists" arrested in a raid Wednesday had gathered an arsenal of weapons including throwing stars, gas masks, knives, a hunting bow, brass knuckles and a shield with protruding nails, Alvarez said.
One allegedly boasted "have you ever seen a cop on fire" as they planned to destroy police cars and attack four police stations -- including headquarters -- in order to undermine the response to their attacks, Alvarez said.
Some of the other proposed targets included the home of Chicago mayor Rahm Emmanuel and "certain downtown financial institutions," she added.
Lawyers for the three men insisted that they are innocent, peaceful activists who were instead the target of a police "setup" aimed at intimidating and discrediting the protest movement.
"We believe it is a setup, an entrapment to the highest degree and it is sensationalism by the police and the state to discredit the protesters that have come here to non-violently protest," said Michael Deutsche of the National Lawyers Guild.
The three men believe they became targets after posting a video on YouTube in which they were stopped and harassed by police about their protest plans, Deutsche said.
They were befriended by either informants or undercover officers -- a woman nicknamed Mo and a man known as Glove -- who ended up framing them for the crimes, he said.
"They're the ones who brought the materials and tried to get our clients to engage in illegal activities," Deutsche told reporters after the men were ordered held in jail on $1.5 million bonds.
Hundreds of protesters rallying to free the "NATO 3" marched through the city's business district blocking traffic and chanting "our passion, our freedom, is stronger than their prisons" Saturday.
"The police in Chicago have a long history of not telling the truth, especially about dissidents and activists," said John Barton, 40, a protester from the Chicago suburbs.
Ben Mandley, a protester from Oregon who came to rally against "racist American imperialism overseas," took a wider view of the arrests, and said the true terrorists are the leaders of the NATO member states.
"While we have known terrorists -- people who are known to bomb innocent people -- in town, charging anyone with terrorism besides those people needs to be a complete fallacy," Mandley, 21, told AFP.
Police and prosecutors dismissed the allegations of a setup and insisted they were acting swiftly to protect the public.
"These charges are not just based on conversations, nor were they based on idle talk," Alvarez said.
Chicago police superintendent Garry McCarthy expressed his frustration with a simple "they can say whatever they want."
Fears that demonstrations could turn violent have put Chicago on edge, with some downtown businesses boarding up their windows and even telling office workers to ditch their suits and ties and dress down to avoid being hassled.
Police and protest organizers have vowed that there will be no repeat of the trouble that erupted at G20 summits in London and Toronto or the riots that scarred Chicago during the 1968 Democratic National Convention.
Several street protests held so far this week have been peaceful, and most of the 15 people already arrested were engaged in acts of civil disobedience, such as refusing to leave the building housing Obama's campaign headquarters.
The three men facing terrorism charges are Brian Church, 22, of Fort Lauderdale, Florida; Jared Chase, 27, of Keene, New Hampshire; and Brent Betterly, 24, of Massachusetts.