A block of flats was evacuated after police found household products "disguised to look like an improvised explosive device".
Bomb disposal experts were called to Gillam Road, Bournemouth, after officers discovered the "unknown item" in an overnight search.
It followed reports of a man "setting fire to items" in a garden.
A 42-year-old man and 29-year-old woman have been arrested on suspicion of arson with intent to endanger life.
Up to 30 people were provided with temporary accommodation after emergency services were called to the scene at 00:50 BST.
It was alleged a man made threats that he was making a bomb, Dorset Police said.
A cordon was put in place while a bomb disposal team examined the device, police added.
A force spokesman said: "The Military Explosive Ordnance Disposal team attended and, alongside scenes of crime officers, assessed the items which were found to be household products allegedly disguised to look like an improvised explosive device.
"The items were ruled not to be a viable explosive device and no controlled explosions were necessary."
Det Ch Insp Mark Callaghan added: "I would like to reassure the public that this was an isolated incident which has now been resolved and there is nothing to suggest this was terrorism related."