NSW Police arrested Guy Norman Hartcher in Pendle Hill around 12:15pm on Monday.
According to police, Facebook had identified an account sharing child abuse material overseas that was allegedly operated by the 77-year-old.
The account was shut down and referred to the National Centre for Missing and Exploited Children, who referred it to NSW Police in early December.
An investigation into the religious leader was then launched under Strike Force Trawler.
Detectives purporting to be a 14-year-old boy allegedly communicated with Mr Hartcher on the internet.
Detective Superintendent Jayne Doherty said in a press conference on Tuesday that Mr Hartcher allegedly shared "sexually explicit photographs and discussed in detail sexual acts he'd like to commit" with the teenage boy during the online conversation.
He allegedly organised to meet with the boy in Pendle Hill, where he was arrested by detectives.
Mr Hartcher was charged with use carriage service-procure under 16 years for sex with another and use carriage service to send indecent material to person under 16.
'There is no more serious or grave offence'
Superintendent Doherty said the alleged offences were "extremely serious".
"We have a 77-year-old male who we allege has turned up to meet a 14-year-old boy for sexual act. There is no more serious or grave offence against a child," she said.
Superintendent Doherty urged parents to be aware of who their children were communicating with online.
"The online exploitation of children is a very real thing in our community today," she said.
"Parents need to be aware of how easy it can be for their children to discuss online sexual acts with people that they do not know."
Mr Hartcher was previously the head priest of the Gresford-Dungog parish in the Maitland-Newcastle Diocese.
He was refused bail and is expected to appear before Parramatta Local Court today.
Investigations under Strike Force Trawler continue.