Police have revealed that more items, including a .357 magnum revolver, ammunition, four 12-gauge shot rounds and two stolen jet-skis, were discovered during a raid on a Warilla property on Wednesday.
Police arrested a 51-year-old man with alleged links to Queensland criminal motorcycle gangs after he was stopped while driving disqualified on the Princes Highway at Gwynneville.
His house was later searched and the items, plus $1.8 million in counterfeit Australian currency, were found.
The man was charged with driving while disqualified and also faces extradition to Queensland.
Police said a forensic examination would determine the exact charges the man would face.
Lake Illawarra Detective Inspector Kevin Bale said the fake cash would be taken to Melbourne where it would be destroyed.
"They'll assess ... and confirm it's counterfeit currency," Insp Bale said.
He said it wasn't believed the money had made it into the local economy, but urged people in the Lake Illawarra area to be on the lookout for fake bills.
"The money actually has writing on it saying [it's] not valid tender," Insp Bale said.
"We'd encourage people to double check their notes just in case.
"Some of the quality was variant, some of it was quite bright in colour - the $50 notes were probably more realistic than the $100 notes."
Insp Bale said the revolver would be forensically examined, while the two stolen jet-skis would be returned to their owners.