An Israeli court has granted bail to former Melbourne principal Malka Leifer as she fights extradition to Australia, where she is accused of sexually abusing her female students.

A judge in Jerusalem on Wednesday ruled Ms Leifer, 52, should be released to her sister’s house and remain under the supervision of five ultra-orthodox Jewish women.

The former headmaster of the Adass Jewish School faces 74 counts of sexual assault in Victoria.

She fled to her native Israel in 2008 when allegations of inappropriate behaviour involving a student first surfaced.

Australia filed an extradition request, and the mother of eight was then arrested by Israel police in 2014.

Ms Leifer was released on bail and managed to avoid multiple extradition hearings, claiming she suffered from panic attacks and was too unwell to leave her home and face the court.

However, she was jailed last year after private investigators obtained videos of her living normally in an orthodox Jewish settlement, shopping and socialising.

In five years of court hearings, 30 psychiatrists have already been involved in determining if she is faking her illness to avoid extradition.

Psychiatrists are expected to submit a final report on Ms Leifer’s mental fitness in December.

Lawyers for the State of Israel have two days to appeal against the bail decision before Malka Leifer is released.

–ABC