Nedal Lakmas, 29, allegedly groped the 23-year-old actress during an event in Sydney last month.
Lakmas' lawyers said he will undergo mental health treatment before he is due back in court next month, and they applied to have the case heard under the country's Mental Health Act.
He left the court shielding his face and smiling.
Hyland was attending a social function for cast members at a Sydney hotel when she was allegedly groped on the chest by Lakmas, who had asked her to pose for a photograph.
The actress who plays big-eyed teenager Haley Dunphy immediately alerted private security guards, who called police to the scene.
Hyland was shaken by the incident and left early from the event sponsored by Qantas Airways.
"Sorry to all the fans outside the #qantas event that I didn't get to say hi to but I had to leave due to an inappropriate touch of a fan," she wrote on Twitter.