Two men were arrested after police pulled over a white 2006 Dodge Magnum on the Island Highway near Terminal Park Mall Wednesday.
Police stopped the car, shortly after 6 p.m., after a surveillance team observed its occupants had conducting numerous suspected drug transactions.
A search of the vehicle turned up an undisclosed amount of money and a small amount of white substance police believe is cocaine.
The driver and passenger were arrested for possession for the purpose of trafficking.
Both men, one in his 40s and the other in his late 30s, are from the Lower Mainland, were staying at a local hotel and have no known connections to Nanaimo, police said.
The suspects were released on promises to appear in Nanaimo provincial court at a later date.