Victorian man Cleophias Machaya was charged with offensive behaviour after police from Operation Shelter were called to Bondi Junction in Sydney's east over reports of suspicious behaviour.
According to a NSW Police lawyer, he had been wearing a puffer jacket with the weighted vest at 10.10pm on Sunday night while asking where Bondi Beach is.
But the police prosecutor later admitted in court his superiors were leaning towards abandoning the case against Machaya.
The Victorian's lawyer confirmed he had received an undertaking that his client was likely to be in the clear.
 "I've received a strong indication in writing that the charges that attract the most significant concerns may well be withdrawn," Liam McKibbin said in bail court on Monday.
Before the revelation, the 33-year-old, who has no criminal record was sobbing and shaking his head as the prosecution laid out its arguments.
"I just made a mistake," Machaya said, before his lawyer advised him not to speak.
After hearing he would be allowed to leave custody straight away, Machaya clasped his hands together and said "thank you" repeatedly.
Machaya was granted bail on the condition he will not be allowed to re-enter NSW unless it is for future court hearings.
"You need to get in your car and leave the state," Mr McKibbin told his client.
A picture of the vest presented to the court showed a camouflage-coloured weighted vest with silver duct tape haphazardly wrapped around areas that would have laid on the wearer's chest and back.
Though Machaya had said he was wearing the weighted vest to train for mixed martial arts, the prosecution said his actions raised significant alarm and magistrate Margaret Quinn added it was "most unusual".
"To go around with a camouflage vest in a place where there's been severe distress to people is extraordinary," she told the court on Monday.
A few kilometres away at Bondi Beach, thousands had gathered to commemorate the 15 people killed when two gunmen opened fire on a Hanukkah celebration in mid-December.
Heavy police presence surrounded the event as locals and members of the religious community marked the Jewish period of mourning.
Given the circumstances, the police lawyer argued Machaya's intention was to cause fear.
Police searched his car, where they allegedly found another duct-taped vest, a face mask and a tin believed to contain prohibited drugs.
Both vests were later deemed safe after being examined by bomb disposal unit officers.
The weighted vest that first raised alarms has since been destroyed, which means there is no risk of causing any further alarm, Mr McKibbin said.
Machaya will return to court on February 9.
Operation Shelter was established in 2023 to address anti-Semitism and other hate crimes.
