People have been evacuated from six flats after a "suspicious device" was found in an outhouse.
Derbyshire Police said they were called to a block of flats off Devonshire Close in Newbold, Chesterfield, to reports of concern for a man's safety at 02:00 GMT.
After arriving they found a device and called a bomb squad.
The force added the device has since been destroyed and a 25-year-old man has been arrested.
Police would not give further details on the device.
The arrested man is being held on suspicion of making an explosive substance with intent to endanger life/injure property and remains in custody.
Residents have not been allowed to return while police inquiries continue.
An Ministry of Defence spokeswoman confirmed they had provided a military explosive ordnance disposal team but could not comment further.