The 15-year-old, who cannot be named, was charged on Friday with conspiring to engage in an act in preparation for, or planning, a terrorist act.
Magistrate James Viney denied the teenager bail on the basis exceptional circumstances did not exist to secure his release.
"There is an unacceptable risk to the protection of the community," he told Parramatta Children's Court on Thursday.
The magistrate said this was of "paramount consideration" and found the boy's alleged explicit threats to stab Jewish or Assyrian people and a previous alleged assault to be "gravely concerning".
The court previously heard the boy had been involved in an encrypted chat group titled Plans where he talked with co-conspirators who were planning an upcoming attack targeting Jewish people.
Prosecutor Rebekah Rodger said the boys were not just talking and knew people who had acted on threats.
The magistrate detailed messages allegedly sent by the teenager between April 20 and April 21.
"Don't youse want to do any attack … what about Jews brother what about Palestine? ... I am so cut, I want to do it so bad," the teenager allegedly wrote in one message.
"I really want to do an attack now because I have so much hatred for these kuffar (non-Muslims) its not funny, I want to do jihad now," anothermessafe read.
"The messages clearly set up the young person wanting to do something catastrophic," Mr Viney told the court.
The boy's lawyer Ahmed Dib previously told the court his client had a history of behavioural issues, lacked confidence and had low self-esteem.
He said the teenager put on a macho performance in messages about performing an attack and refuted that any such plan was in motion.
Two hand-drawn ISIS flags were found in the boy's bedroom when police raided the family's home in April, the court previously heard.
The boy propped his head up with his hand for much of the hearing as he watched on from custody via videolink, as his parents sat in court.
His mother left in tears.
The matter is set to return to court on June 21.
