Zane Juchtzer, 21, appeared in Warrnambool Magistrates Court on Friday where he made a successful bail application.

The court heard Mr Juchtzer was arrested on Ballarat Road on Thursday after police were called to multiple reports of a man walking with a large knife.

He was intercepted and allegedly found in possession of a homemade knife.

The weapon had a 28 centimetre-long blade which was 14 centimetres deep.

The court heard Mr Juchtzer was in a "heightened and agitated state".

When asked to drop the knife, he did.

The man was already on bail for charges of making threats to kill and criminal damage.

Those charges relate to an alleged incident on August 14 when the man threatened to stab, kill and seriously assault a family member.

The alleged threats were made at a hotel after Mr Juchtzer asked the complainant for a cigarette.

He then allegedly punched a large hole in a door, causing about $120 in damage.

Mr Juchtzer later told police he acted like a "f***head" when he was angry.

Magistrate John Bentley said he was willing to release the man on bail given his eligibility for the Court Integrated Services Program, which would offer a coordinated approach to the man's assessment and treatment.

The man was released from custody and will appear in court again in November.

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