Authorities said police on Tuesday searched some 119 homes and offices in seven regional states and opened probes against 80 people accused of running the group despite a ban leveled in 2000.
In the southern state of Bavaria, detectives found a working hand grenade, a pistol and a starting gun, as well as paraphernalia with neo-Nazi and racist slogans including T-shirts, compact discs, newspapers, posters and videos.
Blood and Honor, an internationally-active skinhead group, was notorious in Germany before it was blacklisted for organizing skinhead concerts that whipped up far-right sentiment, particularly in the former communist eastern states.
Germany saw a sharp rise in the number of neo-Nazis last year and in their political party membership, the news weekly Focus reported last month citing government statistics to be released in May.
According to the report, the number of neo-Nazis rose by some 300 to 4,100 while the ranks of the neo-Nazi National Democratic Party (NPD) swelled by 700 to 6,000 registered members.