A picture made available Dec 15, 2014 shows Muslim cleric Man Haron Monis arriving to the Downing Center after a pre-trial hearing of his case, in Sydney, Australia, 18 April 2011. [Photo/IC]

SYDNEY - Man Haron Monis may have been suffering a psychotic episode at the time of the Sydney siege, the inquest heard on Wednesday.

The inquest into the background of the Sydney siege gunman heard a Sydney hospital referred Monis to psychiatrist Dr Kristen Barrett in May 2010 who diagnosed him with a mental illness, local media reported.

"He felt that he was being watched by groups in Iran and Australia and that this had been ongoing for 14 years," Barrett said. "My impression was chronic schizophrenia... that was my provisional diagnosis."

Barrett prescribed Monis anti-psychotic medication and appeared to show improvement as she saw him over the following months.

Monis was further prescribed anti-anxiety medication after expressing concerns he was offending people due to his poor English.

However, Barrett told the inquest that over the course of the next six months, Monis decided to reduce the amount of medication, stopping completely.

Barrett believes Monis may have been suffering a psychotic episode at the time of the siege.

"It seemed to me that some of the things he was doing before (the siege) suggested that some paranoid delusions were possible," Barrett said.

The New South Wales (NSW) Director of Public Prosecutions (DPP) moved to stop the inquest examining why Monis was on bail at the time of the siege.

Monis was on bail for 40 counts of sexual assault involving a spiritual healing business he was operating.

Monis was also on bail for being an accessory to murder of his former wife.