The 17-year-old was arrested at his home at The Oaks, about 25 kilometres west of Campbelltown, on Tuesday afternoon and was questioned for almost 10 hours before being charged with two offences.

The boy, who has a mental illness, was refused bail in Parramatta Children's Court on Wednesday. His Legal Aid lawyer will make a bail application on Thursday.

Fairfax Media understands the boy had written several Facebook messages between Saturday and Tuesday with threats to kill police as well as a message saying he was on his way into the city to kill 20 people.

When police visited his family home on Tuesday afternoon, they seized his laptop and a map with several "attack sites" around Sydney marked out.

The boy didn't have access to firearms and some of his social media messages were about ways he could source a weapon, Fairfax Media has been told.

However, his baffled and distraught family said the boy was not at all religious and was of Greek origin. He left the house on Tuesday but went only to Camden and Warragamba, they said.

The boy is described as having special needs and he has gone missing from his home on at least two occasions.

On one occasion in 2014, his family spread a message on social media begging for people to look for him but warning them not to approach the boy because he has special needs and is strong and can get aggressive.

On another occasion this year, he had to be rescued from the bush by PolAir. He then posted a message online thanking the police.

Police Commissioner Andrew Scipione defended the decision to charge the teen with terrorism offences despite the fact he has a mental illness. He said "it was the option we were left with".

"[A social media post] talked about hurting a police officer, in fact killing a police officer," Mr Scipione said.

Police sources told Fairfax Media the boy was not considered a religious extremist but was making threats that were "imminent" and that had ideological or political elements.

Channel Nine reported that he made posts allegedly supporting the Orlando nightclub shooting and made threats of carrying out something similar in Australia.

Court documents say he had allegedly sent online threats between Saturday and Tuesday, created an attack map and deleted hard drives in his planning or preparation of a terrorist act.

He was charged with one count of acting in preparation for, or planning, a terrorist act, and one count of using a telecommunications network with the intention to commit a serious offence.

Police said there was "no threat to the community" and the boy's arrest was not related to any previous terrorism investigations.

The boy's father said: "He's no terrorist, he's got mental health issues. He was trying to, like, just start off a prank, that's it."