One of those detained in the raid in the Jenin area was Muhammad Mashkah, among a batch of 500 Palestinian prisoners released by Israel last month after a landmark Middle East peace conference in Egypt.
Another suspect, Ahmad Mashkah, was allowed in February to return to Jenin after being expelled to the Gaza Strip in 2003.
An Israeli security source said the cell was manufacturing Qassam rockets and had been involved in "shooting experiments" to improve their rocket launching abilities.
The makeshift rockets are named after the armed wing of the Hamas movement, Izz al-Din al-Qassam Brigades, which pioneered their manufacture.
Qassam rockets are crude devices that can carry a 5kg explosive charge over a distance of about 10km.