A 40-year-old man has been charged with making firearms following a search warrant at Edgeworth.
At about 8am on Friday police from State Crime Command's Firearms and Organised Crime Squad, with assistance from Port Stephens police, executed a search warrant at a house at Etheridge Crescent.
During the search, police allegedly seized designs, equipment and materials used to make handguns.
Just before 2pm the man was arrested at Waratah Police Station and charged with unauthorised manufacture firearm (pistol) and possession of a prohibited firearm (pistol).
He was expected to appear in court later on Saturday.
Police will allege the man was found in possession of a homemade handgun in January this year and an identical handgun was seized in September 2012 from another man.
It is also alleged the handguns match the materials and designs located by police during the search warrent.