The man at the centre of a stand-off outside New South Wales State Parliament has faced a Sydney court and withdrawn his application for bail.

A block of Sydney's Macquarie Street was shut down for two hours yesterday when 58-year-old Abdula Ganigi allegedly began making threats from his car parked outside Parliament's gates.

Police negotiators joined the riot squad and bomb disposal officers at the scene after the Wollongong man allegedly threatened to set a jerrycan of flammable liquid alight.

It is understood police struck when Ganigi moved for a cigarette lighter, with officers firing a gas round and smashing the car windows to drag the man into the street.

He was taken to St Vincent's Hospital with minor cuts and injuries before being released and charged with threatening sabotage, possession of explosives and threatening to damage property.

He appeared via video link in a Parramatta Bail Court this morning.

Initially his barrister sought bail, telling the court she observed on the ABC last night that her client only possessed a two-litre fruit juice container, 100 millilitres of clear liquid and a green cigarette lighter.

Magistrate Alan Moore said he would be more sympathetic to a bail application if he had access to a psychiatric assessment.

After a brief adjournment, the bail application was withdrawn and the matter will return to court on January 6 when a written report from Ganigi's psychiatrist is available.