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The priest stabbed alongside a bishop in an alleged 'act of terror' in Sydney has been released from hospital and appears to be in good spirits.

Bishop Mar Mari Emmanuel was allegedly stabbed multiple times by a boy, 16, while giving a sermon at Christ the Good Shepherd Church in Wakeley on Monday evening.

Father Isaac Royel suffered injuries to his hand and should coming to the bishop's aid.

He walked out of Liverpool hospital on Wednesday and was seen waving to an exhilarated neighbour with a bandage wrapped around his hand.

Bishop Emmanuel remains in hospital in a stable condition after undergoing surgery on Tuesday.