Police Prosecutor Michael Allnutt told the court that Azari had made a threat during a phone call a few days ago which involved a "random selection of persons to execute".
Azari, who has dark hair, a beard and moustache, had displayed "an unusual level of fanaticism" in the call, which was intercepted by police.
Azari's lawyer Steve Boland did not apply for bail but asked Magistrate Richard Bailey if Azari could go back down to the dock during the hearing.
Magistrate Bailey agreed and Azari, who had sat in the dock stroking his beard and smiled briefly while talking to Mr Boland, left the courtroom.
Authorities raided a string of homes and made several arrests. Photo / NSW Police
The court appearance followed a series of pre-dawn raids that saw 25 search warrants executed across Sydney's northwest, as well as a series of raids in three suburbs in Brisbane.
"Police believe that this group that we have executed this operation on today had the intention, and had started to carry out planning, to commit violent acts here in Australia," AFP Acting Commissioner Andrew Colvin told reporters in Sydney.
"Those violent acts particularly related to random acts against members of the public."
Beheaded on camera
Police sources revealed more details to Daily Mail Australia, that the plot involved abducting a member of the public in Sydney and beheading them. ABC reported that the abducted member of the public would be draped in an Islamic State flag and beheaded on camera.
Channel Seven reports that the random beheading would have been carried out in the streets of Martin Place in Sydney's CBD.
Prime Minister Tony Abbott confirmed that he was briefed on the anti-terror operation on Wednesday night.
He said a senior Australian ISIL member has asked supporters in Australia to carry out "demonstration killings".
"That's the intelligence we've received. That exhortations, quite direct exhortations, were coming from an Australian who is apparently quite senior in ISIL to networks of supporters in Australia to direct demonstration killings in Australia. This is not just suspicion this is in intent," Mr Abbott said.
Mr Abbott said the information he has received shows Australia is at a "serious risk" from a terrorist attack.
'There are networks of people here in Australia who will do us harm and it's very important that we are one step ahead of them and I think this morning we were,' he added.
"Largest operation in Australia's history
A similar attack occurred on British Army soldier, Lee Rigby, in May 2013. Quoting Canberra sources, the Nine Network reported an attack was imminent.
AFP Commissioner Colvin said: "It is the largest operation of its type undertaken in Australia's history."
Police revealed officers had to use force to detain three people.
One Sydney man involved in the raids was reportedly taken to hospital with injuries he claims he received from police.
A photo of the man, obtained by the ABC, shows bruising around his eye.
Some members of Sydney's Muslim community are planning a protest on Thursday night in response to the dawn-raids.
A Facebook event group called "STOP TERRORISING MUSLIMS!" claims that brutality was used by the police during the raids.
Around 12 homes were searched in Sydney's northwest suburbs by NSW Police and Australian Federal Police (AFP).
Police executed search warrants in Beecroft, Bellavista, Guildford, Merrylands, Northmead, Wentworthville, Marsfield, Westmead, Castle Hill, Revesby, Bass Hill and Regents Park.
The AFP also carried out three search warrants in Brisbane in the suburbs of Mount Gravatt East, Logan and Underwood.
The Queensland raids were not directly related to the operations in Sydney.
Barbaric path
The arrests in Sydney follow months of surveillance of people linked to the terrorist group Islamic State, which has been cutting a barbaric path through Iraq and Syria.
"25 search warrants across Sydney have been executed and there is one person who has been charged with serious terrorism related offences," Acting Commissioner Colvin said.
"The operation commenced earlier this year and the police believe that they had the intention and had started to carry out planning the attack here in Australia particularly related to random acts to members of the public."
Heavily armed police have made a number of arrests in a series of dawn raids in northwest Sydney. Photo / NSW Police
It's believed those arrested in Sydney could have links to a Brisbane man now facing terrorism related charges.
The search warrants carried out in Queensland are a follow up to the previous terror investigation in Queensland last week.
"We are investigating links between the two investigations in Sydney today and Queensland last week, it's too early to speculate about what those linkages are," Mr Colvin said.
NSW Police Commissioner Andrew Scipione told reporters Sydney residents would see large numbers of police in public places in the coming days.
"There will be 220 police very visible dealing with any troublemakers," Mr Scipione said, in what is known as Operation Hammerhead.
OPERATION APPLEBY: THE FACTS
On Thursday 18 September a series of pre-dawn raids were carried out in what has been declared as Australia's largest ever counter-terrorism operation.
IN SYDNEY
• 25 search warrants were executed
• 10 warrants were undertaken in relation to vehicles
• 800 NSW police and AFP officers were involved
• 15 people were arrested
• One man has been charged so far with serious terrorism related offences
• Homes were searched in at least 12 suburbs in the city's north-west including Beecroft, Bella Vista, Guildford, Merrylands, Northmead, Wentworthville, Marsfield, Westmead, Castle Hill, Revesby, Bass Hill and Regents Park
IN BRISBANE
• A series of raids related to last week's raids in Brisbane were carried out
• Police are investigating links to the Sydney terror suspects
• 70 officers were involved in the raids
• Last week two men were arrested in Brisbane and appeared in court charged with terrorism-related offences
• Homes in the Brisbane suburbs of Mount Gravatt East, Logan and Underwood were raided as part of the coordinated operation on Thursday
