An Israeli military spokeswoman said that the two Palestinians, aged 16 and 17, were arrested near Nablus on Monday.
"Our forces have arrested two young Palestinians, who were carrying 20 kilogrammes of explosives, at a roadblock at Beit Iba, near Nablus," she said.
They were suspected of planning an attack in Israel to coincide with the Jewish festival of Purim, which began on Monday and is marked by carnival parades.
Eleven Palestinians were also arrested overnight in the West Bank, including three members of Hamas and one from Islamic Jihad, the spokeswoman said.
Thousands of police officers and border guards, as well as volunteers, have been mobilised to bolster security during the holiday.
Troops also stepped up security along Israel's volatile northern border with Lebanon, fearing attacks or potential kidnappings conducted by the Lebanese-based Hezb Allah.
"Our forces have arrested two young Palestinians, who were carrying 20 kilogrammes of explosives, at a roadblock at Beit Iba, near Nablus"
Israeli military spokeswoman
Local media quoted army officials as saying that the military was on the "maximum" state of alert to prevent any attempted kidnappings of civilians or soldiers as Israel moves closer towards a general election on 28 March.
The Israeli government has told the Lebanese authorities that they would hold them fully responsible for any incident, according to public television which reported that there was "precise information" on Hezb Allah kidnapping plots.
New roadblocks have been erected to ban traffic on a road running parallel to the border, and farm workers have been ordered to avoid fields next to the frontier.