Bali is on high alert after intelligence reports indicated the possibility of a terror attack targeting VIPs attending a memorial service to mark the 10th anniversary of the 2002 bombings.
The country's terror alert level was raised to its highest level in the wake of the threat, revealed on Wednesday morning.
Some 202 people, including 88 Australians and three New Zealanders, were killed in the attacks on Paddy's Bar and the Sari Club at the beach resort of Kuta.
Deputy police chief Brigadier General Ketut Untung Yoga Ana says Australian dignitaries, including Australian Prime Minister Julia Gillard and Indonesian President Susilo Bambang Yudhoyono, are among potential targets, AAP reports.
New Zealand's representative at the service will be Foreign Affairs Minister Murray McCully.
The memorial service is to be held at the Garuda Wisnu Kencana Cultural Park in Jimbaran on Friday morning and will also be attended by survivors and families of those killed.
Security has been ramped up around Jimbaran, and more than 1500 police and military personnel, including snipers, will be deployed.
Another memorial service will also be held later in the day at Kuta.
The latest threat comes after police shot dead a group of five suspected terrorists at two separate locations in Bali in March this year.
The terror cell, which had links to the group that carried out the 2002 Bali bombings, were believed to be planning a series of terrorist attacks including in Kuta, Jimbaran and Seminyak.
