A group of 60 black-clad demonstrators who were allowed to assemble outside NSW parliament and yell Hitler youth chants on November 8.
During the rally, a banner was unveiled reading "Abolish the Jewish Lobby" while two speeches were made by participants.
NSW Police were given a week's notice about the neo-Nazi rally via a permit application but decided against taking it to court.
Officers arrested a 32-year-old man in South Penrith in Sydney's west on Wednesday and charged him with publicly inciting hatred on grounds of race.
Specialist counter-terror and security police had been investigating and made Wednesday's arrest after legal advice was sought about the assembly and content of the speeches, NSW Police said in a statement.
The 32-year-old was granted conditional bail to appear at the Downing Centre Local Court on June 3.
Peter Wertheim, who is co-chief executive of peak body the Executive Council of Australian Jewry, told an anti-Semitism inquiry on Tuesday the decision by NSW police to allow the rally was a "gross error of judgment".
"Having a phalanx of Neo Nazis on Macquarie Street, where people are passing by," Mr Wertheim said at the Royal Commission into Anti-Semitism.
"A person of colour could have passed by, a person wearing Jewish religious clothing or Muslim religious clothing.
"The risk to public safety that that would have constituted seemed to me to be a gross error of judgment."
The 32-year-old's arrest is not the first legal consequence to have been suffered by a participant in the rally.
South African national Matthew Gruter was unmasked as one of the participants in November and had his visa cancelled by Home Affairs Minister Tony Burke.
"Somebody who gets involved in neo-Nazism in Australia, they shouldn't pretend that they're somehow patriotic," Mr Burke said after cancelling his visa.
Fellow neo-Nazi Joel Davis is facing charges relating to him calling for the "rhetorical rape" of federal MP Allegra Spender after she denounced the rally and its organisers, the National Socialist Network.
The group claims to have disbanded since January when the federal government launched a hate speech crackdown in the wake of the Bondi terrorist attack.
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