A 16-year-old Sydney boy charged with a terrorism offence over an alleged Anzac Day terror plot has pleaded not guilty.

Key points: Lawyer says boy will apply for bail on Friday

Lawyer says boy will apply for bail on Friday Police say they intercepted messages between him and IS recruiter

Police say they intercepted messages between him and IS recruiter Boy allegedly tried to obtain gun for use at Anzac Day event

Boy allegedly tried to obtain gun for use at Anzac Day event Magistrate grants prosecution six weeks; case will return in June

The teenager is charged with planning or preparing to commit a terrorist act by trying to obtain a gun, which police say he intended to use at an Anzac Day event.

It is understood messages intercepted by police made reference to April 25, but did not disclose a specific location or time.

The boy was arrested on Sunday near his home in Auburn in Sydney's west, after an investigation by officers attached to Operation Vianden.

He did not appear in court for the brief hearing but his lawyer, Zemarai Khatiz, pleaded not guilty on the boy's behalf and said his client would apply for bail on Friday.

Mr Khatiz said he had arranged for an expert psychologist to assess the boy while he was in custody, and the assessment would form the basis of the bail application.

"The psychological impact of long-term incarceration will be a very relevant and powerful factor in that bail application," he told the court.

Prosecutor Chris Choi told the court police would oppose bail, adding that the prosecution required 10 weeks to prepare their brief of evidence.

"We need 10 weeks because there are a number of electronic devices that require examination," she said.

Magistrate Elizabeth Ryan granted the prosecution six weeks to prepare the brief, which means the matter will return to court in June.

Teen 'linked to Islamic State recruiter'

Security was increased at Anzac Day events following the teenager's arrest.

Police sources have told the ABC's 7.30 he had been on their radar since a Melbourne terrorism plot in May last year.

He was allegedly in contact with police as part of an intervention program attempting to disrupt overseas recruitment for the Islamic State (IS) jihadist group.

Counter-terrorism sources told 7.30 they also allegedly discovered communications between the 16-year-old and a younger boy who has previously been charged under Operation Appleby with preparing a terrorist attack, along with four other members of an alleged terror cell.

They found communications between him and senior Islamic State recruiter Neil Prakash, and, after raiding his home, signed him up to the program after speaking to his parents, police told 7.30.

The program uses mentors, psychologists, religious leaders, teachers and work placements to try and steer a handful of young extremists away from IS.

It targets young people who are no longer the focus of police or ASIO investigations and who are considered open to diversion strategies.

Federal Justice Minister Michael Keenan said on Monday there was no indication that more arrests would be made in relation to the case.

He joined police and NSW Premier Mike Baird in calling for people to put concerns over safety to the back of their minds, and attend Anzac Day events.