Officers were carrying out plain-clothed patrols on Monday (September 20) as part of Project Adder, which aims to reduce drug-related crime.
A Sussex Police spokesman said: “After witnessing suspicious activity in areas of Alexandra Park and Gensing Gardens, officers began carrying out enquiries around those suspected of being involved.
“Further suspicious behaviour was witnessed in lower St Leonards the following day, on Tuesday (September 21).
“Officers observed and arrested two people in Gensing Gardens - a 16-year-old boy on suspicion of being concerned in offering to supply a Class A drug (cocaine) and possession of a knife blade / sharp pointed article in a public place, and a 21-year-old man on suspicion of being concerned in the supply of a Class A drug.”
A search found dozens of wraps of Class A drugs and cash, which were seized by officers, said police.
A search of an address in Silverlands Road, St Leonards, also found further Class A drugs and cash.
Police said a 24-year-old man was arrested at the address on suspicion of being concerned in the supply of a Class A drug.
The 16-year-old boy and 24-year-old man have been released on conditional bail, and the 21-year-old man released under investigation while enquiries continue, police confirmed.
Project Adder was launched earlier this year by the Home Office with the aim of tackling drug-related harm and reducing drug-related deaths in five key areas across the UK.
Hastings is one of five areas that will benefit from a share of the £148 million investment in the scheme, which will run until March 31, 2023.
A police spokesman said: “Led locally by East Sussex County Council and Sussex Police, Project Adder has seen an increased focus on enforcement action against those involved in drugs production and supply, safeguarding those who are vulnerable and at risk of exploitation, and treatment and recovery for those suffering from addiction.”