A man arrested in Sydney over an alleged terror plot to blow up a plane has been charged by police with a weapons offence and released on bail.

Khaled Merhi, who was one of four men detained in counter-terrorism raids last Saturday, was today charged with one count of possession of a prohibited weapon.

He was granted bail and released from the Sydney Police Centre this afternoon.

Mr Merhi, 39, will appear in the Downing Centre Local Court on August 24.

His lawyer, Moustafa Kheir, said on Twitter Mr Merhi had been "cleared of any terror allegation".

Police had to either charge or release Mr Merhi by around 8pm tonight under special terrorism provisions.

Brothers Khaled Mahmoud Khayat, 49, and Mahmoud Khayat, 32, were charged over the alleged conspiracy to bring down an Etihad flight from Sydney to Abu Dhabi on July 15.

Khaled Merhi was charged with a weapons offence and released on bail. (9NEWS)

Police will allege the older brother carried an IED to Sydney's international airport in the hope of putting it on the plane in the "checked luggage" of another, unsuspecting, brother.

The parts for the IED were allegedly sent from Turkey via air cargo to be assembled here.

It is alleged the two brothers in custody were put in touch with a senior ISIS commander, who became their controller.

Police allege it was Ahmed Merhi - who joined the terror group in Syria in 2014 – who introduced the trio.

Khaled Merhi is a relative of the ISIS commander. Another relative, Abdul Merhi, was released from police custody without charge on Tuesday.

9NEWS senior crime reporter Simon Bouda said the ISIS commander allegedly “pulled the strings” in the plot, but never actually met the Sydney brothers.

Mr Merhi was released from the Sydney Police Centre today. (9NEWS)

Terror accused Khaled Khayat attends Sydney Airport in 2014. (Supplied)

AFP deputy commissioner Michael Phelan said the alleged plot was "one of the most sophisticated... that has ever been attempted on Australian soil".

He said the passenger "had no idea (he was) going to be carrying an IED".

The device did not breach airport security, but is believed to have been picked up at the check-in desk.

Authorities are confident they've now found "every single component of that IED".

A second alleged plot involved plans to build an improvised chemical dispersion device to release highly toxic hydrogen sulphide.

Police said the chemical plot was "hypothetical" and the alleged terrorists were "a long way from having a functional device".

One of the men arrested over last weekend emerges with a blanket over his head.

Search warrants allegedly revealed however that "precursor chemicals" had been produced.

The Khayat brothers did not appear in court yesterday and no application for bail was made. Police have until October 27 to submit a brief of evidence. The maximum penalty for the charges is life imprisonment.