Radical Indonesian cleric Abu Bakar Bashir on Monday dismissed fresh terrorism charges against him as a conspiracy, as his trial resumed for allegedly funding an Al-Qaeda-style militant group.

The 72-year-old religious leader and alleged founder of the Jemaah Islamiyah regional terror organisation smiled and waved at his supporters, who chanted "Allahu akbar" (God is greatest) as he arrived at the court in Jakarta.

"I understand in principle that I am being accused of being the leader of a militant group in Aceh. Such allegations have been engineered and are just empty talk," he told the judges after hearing the charges against him.

In his cell before the trial, he told reporters: "This is all made up... I did nothing. I was only defending Islam."

Prosecutors say Bashir raised more than $140,000 for a new group called "Al-Qaeda in Aceh" which was discovered in Aceh province, Sumatra, in February last year.

Police say it was training to carry out Mumbai-style attacks involving small squads of suicide gunmen targeting Westerners and political leaders in Indonesia.

According to the indictment, he met the group's operations leader, wanted terrorist Dulmatin, and incited members to conduct attacks including murders and robberies in the name of jihad, or holy war.

Police killed Dulmatin in March last year and scores of other alleged Aceh cell members have been shot or arrested.

If convicted Bashir could face the death penalty.

Some 200 followers of the bearded preacher packed the court in South Jakarta and shouted Islamic slogans in Arabic during the proceedings.

About 2,000 heavily armed police threw a tight cordon around the building in a massive show of force after the mainly Muslim country suffered some of its worst outbreaks of religious violence in years last week.

Three members of a minority Islamic sect were brutally slain by a mob of Islamic extremists on February 6, and two days later another mob rampaged through a Central Java town setting fire to Christian churches.

It is the third time Bashir has been tried for terrorism-related charges including over the 2002 Bali bombings, which killed more than 200 people and were blamed on Jemaah Islamiyah.

Bashir served almost 26 months for conspiracy over the bombings before being freed in 2006 and subsequently cleared of any involvement.

Prosecutors have also unsuccessfully charged him with involvement in the bombings of churches across Indonesia in 2000 and the Marriott hotel in Jakarta in 2003.

The frail but pugnacious cleric denies committing terrorism himself but regularly preaches in praise of Al-Qaeda-style global jihad, and is seen as a hero by many in the radical Islamist movement across the region.

The cleric's former students at his Al-Mukmin Islamic boarding school, near Solo on Java island, read like a who's who of Indonesian extremism.

Prosecutor Andi Muhammad Taufik told the court that in July 2009, the defendant delivered a lecture exhorting his followers to carry out robberies to "secure funds for the struggle".

"Before robbing, the people should be killed so that their property can be obtained," he quoted Bashir as saying.

"These robberies are directed at infidels, who are non-Muslims or the government made up of Muslims who do not carry out Islamic sharia (law), those who can be called devils."

The hearings were adjourned until Thursday.