Fr John O'Reilly faced the Fourth Southern Metropolitan Court in Santiago, Chile, as prosecutors presented a psychological report that said the priest suffered from an "immature and infantile sexuality", "narcissistic conduct" and "insecurity and fragile self-esteem".
The case covers the suspected abuse of two young girls, aged six and 10, in 2007.
They were in Fr O'Reilly's care at the time.
The girls were students at the Colegio Cumbres, a private school in an affluent Santiago suburb.
Fr O'Reilly spoke briefly to journalists upon his arrival at the court yesterday, maintaining his innocence.
"Whatever God wants," the priest responded when asked about his thoughts on facing possible prison time. "We all have to be respectful of that. Whatever God wants."
Fr O'Reilly is a member of the Legion of Christ, a group of priests and seminarians founded in 1941 in Mexico.
The group reached notoriety in 2005 when its founder and leader, Marcial Maciel, stepped down after a sexual abuse scandal.
Until 1983, the group required members to take a vow against criticising their superiors. Pope Benedict XVI banned that vow after the Maciel scandal.
Fr O'Reilly was the Colegio Cumbres' chaplain and spiritual director until July of last year, when news of his possible involvement in the abuse scandal broke.
"The mother of our student made reference to Fr John O'Reilly," read a letter the school sent home to parents and obtained by Chilean local press.
"The priest and Colegio Cumbres agreed to the suspension of all of Fr O'Reilly's activities in the school until the situation is clarified."
About 50 members of the Legion of Christ and people connected to Colegio Cumbres arrived at court to show their support for Fr O'Reilly.
The psychological report also said that he suffered from what it called a "social adaptation deficit" and recommended that, regardless of the case's outcome, he not be allowed to continue to work with children.