The 77-year-old retiree was bailed on strict conditions by a Sydney magistrate on Tuesday after being cuffed by police posing as a 14-year-old boy in Pendle Hill.
Police had been alerted by Facebook to the man's alleged sharing of child abuse material and used undercover officers to begin communicating with the ordained man.
He allegedly shared child abuse material with the "boy" before trying to meet up with him "for sexual activity" on Monday afternoon, police alleged.
A priest has been ordered to have no contact with any children aged under 16. (HANDOUT/NSW POLICE)
"It's extremely serious," Sex Crimes Squad Commander Detective Superintendent Jayne Doherty told reporters.
"There is no more serious or grave offence against a child."
Police are trawling through the man's digital storage devices for potential child abuse material.
The man has no prior convictions.
He declined to be interviewed after legal advice.
After an appearance at Parramatta Local Court on Tuesday on two child abuse charges, he was granted bail on six conditions.
Those include daily police reporting, no contact with any children aged under 16 and staying 500 metres from all schools and child care facilities.
He is next due to face Burwood court on January 8.
1800 RESPECT (1800 737 732)
National Sexual Abuse and Redress Support Service 1800 211 028
Lifeline 13 11 14
Kids Helpline 1800 55 1800 (for people aged 5 to 25)
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