Paul McIntyre, from Derry’s from Kinnego Park, appeared via video link from Maghaberry Prison.
The 52-year-old has been charged with the murder of Ms McKee, possession of a firearm and membership of a proscribed organisation, the IRA.
Ms McKee, who was 29, was observing rioting in Derry’s Creggan estate when she was shot on Thursday, April 18 last year.
McIntyre is currently awaiting trial on charges of rioting on the night of Ms McKee’s murder in Creggan.
Lyra McKee’s friends were present in court, and there was a police presence inside the building, but unlike Mr McIntyre’s previous appearance earlier this month, there were no protest outside the building.
Most of today’s hearing was taken up by a lengthy discussion between the prosecution and defence, which focussed on the images captured on the night Ms McKee was shot.
A police officer told the court that they believed a figure, who was seen picking up objects around the time of the journalist’s death was Mr McIntyre, and police said he had been identified from images captured earlier that day.
However, McIntyre’s defence solicitor, Derwin Harvey, vigorously opposed this, adding that the police were relying on an expert to create an “evidential link” between the two sets of images.
District Judge Barney McElholm said that while there was “universal condemnation” of Ms McKee’s murder, there was “no smoking gun” as such in the case, and that he would be releasing Mr McIntyre on bail.
The defendant was then seen to punch the air when the judge made his decision.
A prosecution barrister said that they would be appealing the decision in the High Court.