Angelo Loras, 35, on Monday pleaded guilty to recklessly endangering members of the East Melbourne Hebrew Congregation by setting fire to their synagogue on July 5.
He admitted pouring flammable liquid at the site's entrance and igniting it with a lighter, creating a fireball that almost engulfed him.
Up to 20 people were inside the synagogue at the time and the fire caused about $54,000 in damage to the entrance doors, the court was told.
Loras was arrested the next day and told police he believed the building was a home rather than a place of worship.
Magistrate Malcolm Thomas on Monday accepted Loras had diagnosed schizophrenia and he did not intentionally target the synagogue.
"We've got a man here who was having hallucinations in relation to zombies," Mr Thomas said.
"He's clearly a man who has been very unwell."
Prosecutor Ryan Mallia accepted Loras' attack on the East Melbourne synagogue was different from the Ripponlea synagogue arson in December 2024.
But Mr Mallia noted the Jewish community was still impacted, regardless of Loras' intentions.
Mr Thomas accepted the congregation would have been fearful but said the courts needed to be careful not to conflate cases together.
The magistrate noted Loras' schizophrenia symptoms had significantly improved in the past four months as he was receiving medication and treatment while on remand.
"The voices have stopped and he's not thinking about zombies anymore," Mr Thomas told the court.
But he said it was "nothing short of disgraceful" that Loras had effectively been kept in solitary confinement while in custody.
"He's not been put in there for any conduct on his part," Mr Thomas said.
Given those conditions, the magistrate indicated he would sentence Loras to the 134 days in custody he had already served and a community corrections order.
He bailed Loras ahead of his corrections assessment so he could engage with housing and mental health supports through the court integrated services program.
"It's in the community's long-term interest that there be a smooth transition for Mr Loras back into the community," Mr Thomas said.
As part of his bail conditions, Loras is not allowed to go within 100 metres of the East Melbourne Hebrew Congregation.
He will return to Melbourne Magistrates Court on Wednesday to be formally sentenced.
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