Shortly before lunch, two well-dressed men entered the Vacheron Constantin store near the posh Place Vendome, where several high-end jewellers are located, and let in a third man who was armed.
Six others, wearing hoods and armed with sledgehammers and axes, then followed them inside, police said.
They smashed the shop windows and took 20 watches with hefty price tags.
A single watch crafted by the Swiss luxury watch maker can sell for hundreds of thousands of euros. Police said the goods stolen were "of a very significant amount."
Around six accomplices outside the showroom, just metres away from France's justice ministry, used smoke grenades to allow those inside to make a speedy escape, police said.
They fled on foot.
Two of the men were arrested in the area and two sledgehammers and an axe were found nearby, police said. The men were placed in custody and were from eastern Europe.
Local police commissioner Francis Vincenti said the raid bore "witness to a new modus operandi" given the number of men involved and the fact that they could make a getaway in an area teeming with surveillance cameras.
Early last month, four men rammed their car into an upmarket jewellery store near Place Vendome, making off with a two-million-euro ($2.6-million) booty.
In December 2008, three men emptied almost all of the stock of gems from the Harry Winston jewellery store. In 2009, police said they had recovered 80 percent of the haul.