Police were called to Belmont Close in Hassocks, West Sussex, at around 9.30am on Saturday where they discovered a suspicious device.
People living in the Middlewick House block of flats, as well as those in a handful of properties nearby, have been told to temporarily evacuate for safety reasons.
Bomb disposal teams have been called to the scene, with a cordon in place on Belmont Close, the Press Association reported.
A 50-year-old man has been arrested on suspicion of making an explosive substance and is currently in custody with an investigation now under way, police said, although it is not thought to be terror-related.
Detective Superintendent Carwyn Hughes said: “We are currently on scene and we are advising residents to avoid the area for the time being.