The device, found in a property in Street Lane, is believed to be a home-made smoke bomb.
It was found as police searched the property shortly after 8pm yesterday.
The search came after officers stopped a car and recovered a large quantity of cannabis, cash and mobile phones.
Police remain in Street Lane today, pending a specialist search of the property.
Three men, aged 24, 27 and 31, from Leeds, were arrested on suspicion of cannabis supply offences and remain in police custody.