The rabbi decided to end his involvement in the case after realising his intervention had been interpreted as supporting an attempt for Ms Leifer to avoid trial, according to a statement from Rabbi Grossman Enterprise.

''Rabbi Grossman has dedicated his life to protecting the weak, especially children, and sees child abuse as the worst of all injustices. The Rabbi recognises the pain and suffering of the victims of sexual assault and has treated them with dedication and care for many years,'' the statement said.

Under the plan, Ms Leifer would have been monitored by two supervisors in the northern Israeli town of Migdal Haemek under the custody of Rabbi Grossman, the town’s chief rabbi.

Rabbi Grossman, the recipient of the 2004 Israel Prize, the country's highest cultural honour, had argued to a court last week for the accused former principal of Elsternwick's Adass Israel school to be freed while she fights extradition to Australia.

“It would be a humiliation for Ms Leifer to remain in custody,” he had said, promising that if she leaves the house “for even a second, we will take her straight to the police immediately” as a matter of his personal responsibility.

The move had angered and shocked Ms Leifer's alleged victims.

One of Leifers' former students and alleged victim Dassi Erlich had slammed the ruling as "an outrageous travesty of justice".

''An official sign-off on the psychiatrist's report was requested three times by the court. The report remains unsigned. What is the reason for this absolute failure of procedure?,'' Ms Erlich had said in a media statement.

Ms Erlich also said the unrestricted nature of Leifer's release was ''appalling and takes away our hope and trust in a justice system meant to protect the vulnerable''.

A lower court had granted Ms Leifer to be released to home detention, a decision the prosecution has appealed.

Ms Leifer has been ordered to stay in police custody in a medical facility while the Supreme Court considers the prosecution's appeal.

Her extradition is the subject of a separate court case.

Israeli prosecutors say she is feigning mental illness to avoid extradition.

Manny Waks, an advocate for Kol v'Oz, a Jewish organisation combating child sex abuse, said Rabbi Grossman should also apologise to Ms Leifer's alleged victims "for compounding their pain and suffering as a direct result of his words and actions."

AAP