The suspects were shot dead in the eastern town of Verviers after they opened fire on police with automatic weapons reported BBC.
Officials say they had returned from Syria and planned imminent attacks on police targets. Another suspect was wounded before being arrested.
Searches were also carried out overnight in the Brussels area.
Speaking after raid in Verviers, near the German border, Prosecutor Eric Van Der Sypt said the terror threat level had been raised to three – the second highest.
Referring to the raid itself, he said: “The suspects immediately and for several minutes opened fire with military weaponry and handguns on the special units of the federal police before they were neutralised.”
After the operation, four Kalashnikovs, bomb-making equipment and police clothing were found, according to local media. Security forces remain in the Verviers area.
Police are expected to provide more details at a briefing on Friday.
“Operations on the ground are now over. We are now exploiting the information [from the overnight anti-terror operations],” Belgian Foreign Minister Didier Reynders told French TV station iTele.
Some Jewish schools in Antwerp and Brussels were closed on Friday, after they were informed that they could be potential targets, Belgian newspaper Joods Actueel reported.
Anti-terror raids also took place late on Thursday in the capital Brussels and surrounding towns, including Sint-Jans-Molenbeek, Anderlecht and Schaerbeek.
Earlier that day, two suspected Islamists were arrested in the Brussels suburb of Zaventem, Belgian media reported.
Belgian officials say more than 300 people have left Belgium to fight with Islamic militant groups in Syria and Iraq.