Public prosecutor Francois Molins said police had found automatic weapons after raids in Strasbourg and Marseille and the group was planning to strike on December 1.
Seven suspects were arrested in the police raids following an eight-month probe, although two were later released.
The other five — four Frenchmen and a Moroccan — appeared in court before anti-terrorism judges on Friday, Molins said at a press conference.
He said that “elements seized in Strasbourg” included written documents showing “clear allegiance” to ISIS and “glorifying death and martyrdom”.
“The Strasbourg commando unit, but also the individual arrested in Marseille, were in possession of common instructions… sent by a coordinator from the Iraqi-Syrian region via encrypted applications,” added Molins.
Investigators established that the Strasbourg cell was planning an attack on December 1 on one of a number of possible targets, although Molins admitted authorities have so far been “unable to determine the exact one”.
The cell’s members researched “a dozen sites” online including the Christmas market on the Champs-Elysees, the Disneyland Paris theme park, cafe terraces in the northeast of the capital, the Paris criminal police headquarters and a metro station, a police source said on Thursday.
Meanwhile, Montpellier prosecutor Christophe Barret said a suspect with no apparent link to terrorism has been identified following the stabbing death of an elderly woman on Thursday evening in a retirement home for Catholic missionaries.
The suspect is believed to be someone “in the entourage of this retirement home”, he said in a news conference.
Barret said investigators discovered an air gun and other elements that he wouldn’t detail in a car near the residence that helped identify the suspect.
“There is no element linking the facts with … terrorism” but the exact motivations of the attacker remain unknown at the point, he added.
Barret didn’t want to disclose any detail on the identity of the suspect in order not to hinder the investigation.
Some 130 police officers are still searching for the suspect.
France has been under a state of emergency since January 2015 when extremists carried out the first of three large-scale attacks in the country.