Two people accused of engaging in terrorist conspiracy, including a convicted Al-Qaeda operative, have returned from Lebanon to live in Australia's Islamic heartland, it was reported Monday.

The Australian newspaper said police and the domestic spy service, the Australian Security Intelligence Organisation (ASIO), were closely watching the two named as Mohammed Ramez Sultan and Zuhair Mohammed Issa.

Sultan, a former used car dealer, was said to have been released in September from Lebanon's Roumieh prison after serving an 18-month sentence on a charge of having helped set up an Al-Qaeda linked cell.

Issa, who is described as an Islamic cleric, was reported to have been charged by Lebanese authorities on an unrelated matter, of allegedly helping Sydney fugutive Saleh Jamal plan terrorist attacks in Lebanon and overseas.

Jamal fled Sydney using a false passport while on bail for firearms offences

The paper said Lebanese authorities had released Issa from detention before the start of a round of trials, given his alleged minor role in what they claimed was a terror conspiracy.

However, Lebanon had not been aware of Issa's journey to Sydney, and Beirut chief military investigating magistrate Riad Talih had since issued a subpoena through the Australian embassy in Lebanon asking for his return.

Another Sydney-based Islamic cleric, Muslim community leader Sheik Taj Din al-Hilali, spoke out strongly in defence of Sultan, claiming he had been "caught up in a case of mistaken identity".

Hilali said Sultan was a regular at a mosque in the Sydney suburb of Lakemba, which is the heart of Australia's Muslim community.

"He is staying with his wife and eight children in a friend's living room and we have not been able to find accommodation for him."

Sultan, who denied requests for an interview, left Australia in 1998 for Lebanon where he was arrested on October 22, 2002, and together with a Saudi man was accused of inciting youths to join the terror network.

Australian Federal Police said they could not comment on the report. - AFP