A man has been refused bail after pleading not guilty to verbally attacking two Muslim women as they drove through Newcastle, north of Sydney.

Scott Papworth, 27, is accused of yelling abuse about Islam and punching a side-view mirror as a woman, 26, and her mother sat in a car in the city about 7:00pm (AEDT) last night.

Police say Papworth followed the pair as they drove away and continued the abuse after they pulled over to fix the car's mirror.

Papworth is also accused of punching a man who tried to help the women, and stealing mobile phones from two people who intervened, before being apprehended by members of the public.

In Newcastle Local Court this afternoon, Papworth pleaded not guilty to two counts of intimidation, two counts of larceny, one count of assault and one count of malicious damage.

Police prosecutor Karl Moir told the court it was "a racially provoked attack on innocent people" and the allegations were very serious given the "present climate" relating to Islam in Australia.

Magistrate Ian Cheetham refused bail, saying Papworth was already on bail for other matters, the alleged comments were racially offensive and his release would pose an unacceptable risk to the victims and the community.

Earlier, Chief Inspector Dean Olsen said the victims had been left shaken by the attack, but were not physically harmed.

He praised the actions of the witnesses who intervened.

"Certainly from a policing perspective I'm quite comforted by the fact that our society is such a good one that people will intervene and stop people from being interfered with in this way," he said.

Papworth will appear in court again next month.