A man has been accused of arming himself with a knife and assaulting two young girls as they slept in their Newcastle home.

The 20-year-old climbed through the lounge room window of the Raymond Terrace home about 2am on Wednesday, police say.

It's alleged he indecently assaulted the seven-year-old before physically assaulting the nine-year-old when she intervened.

The man fled the scene before being arrested in a nearby park and was charged with aggravated break and enter, aggravated indecent assault and common assault.

He has been refused bail and will appear in Newcastle Local Court on November 30.