Adam Everet Livvix, a Christian wanted in the US on drugs charges, was arrested last month after an undercover agent discovered the alleged plot.
Weapons and ammunition stolen from the Israeli army were found at his home.
Mr Livvix's lawyer said the Israeli authorities were exaggerating the security implications of the case.
His arrest comes with tensions between Israelis and Palestinians running high because of a dispute over access to a major holy site in Jerusalem known to Jews as the Temple Mount and Muslims as al-Haram al-Sharif.
Mr Livvix was charged on Monday with conspiring with his roommate, an Israeli soldier, to steal 1.4kg (3lb) of explosives from the Israeli army and being in the country illegally.
The Israeli authorities said the 30-year-old Texan was believed to have arrived in the Palestinian territories in 2013, informs Report citing BBC.
At first he lived in Hebron and Bethlehem in the occupied West Bank, where he was allegedly asked by a Palestinian if he would be willing to assassinate US President Barack Obama during a visit to the region. Mr Livvix refused the request, according to police.
Mr Livvix moved to Israel a year and a half ago, after which he passed himself off to Israeli acquaintances as a US Navy Seal commando.
He also told them "about his negative opinions towards the Arab population in Israel and his desire to cause harm to Muslim holy sites in Israel", the indictment said, something he subsequently allegedly admitted during questioning by the police and security services.
A court has ordered that Mr Livvix be remanded in custody and be sent for a psychiatric assessment before entering a plea.
Mr Livvix's lawyer, Gal Wolf, complained that he had been denied access to legal counsel for eight days after his arrest on 19 November, and that hearings were held without a lawyer being present.