Michael Martin, 69, was released on bail on Thursday morning after a Melbourne magistrate found he did not pose an unacceptable risk to the community.
He was aged 26 when he allegedly attempted to rape Jessie Grace Lauder at her Newport home in Melbourne's southwest in 1981.
He's accused of returning two years later in 1983 and raping her in another attack.
Martin was arrested last week and charged with offences including attempted aggravated rape, aggravated burglary, rape and common assault.
He looked forward with his hand over his mouth as Magistrate Belinda Wallington handed down her bail decision on Thursday.
Ms Wallington said the alleged offending was extremely serious but she could not find Martin was an unacceptable risk to the community.
She also rejected police concerns that Martin would interfere with Ms Lauder's grandson and other witnesses.
"There is no basis for the assertion," Ms Wallington said.
"I am persuaded there is a compelling reason to grant bail in this matter."
Jessie Grace Lauder was sexually attacked in her home in 1981 and 1983. (HANDOUT/VICTORIA POLICE)
She released Martin on the conditions that he live at his Hoppers Crossing address and not contact any witnesses for the prosecution.
The 69-year-old declined to answer questions as he walked out from the court cells.
Martin grew up about 45 metres across the road from Ms Lauder's home and then moved about 200 metres away when he was married, sexual crimes squad Detective Richard Kelly told the court earlier in the week.
It's alleged in September 1981, Ms Lauder heard a loud bang at the back of her home and then saw Martin standing with a knife at her bedroom door.
Martin was wearing gloves, had a pair of underwear over his head and told Ms Lauder to pay him $10 for sex before he tried to rape her, the detective said.
Martin allegedly told her "you won't call police will you" as he left over the back fence, Det Kelly said.
The second alleged sex attack happened in July 1983, when the detective said Ms Lauder heard a smash of glass from the front of the house before she was confronted by a man.
DNA evidence from the two sex attacks led police to Michael Martin, the court was told. (Anita Lester/AAP PHOTOS)
Det Kelly alleged Martin threatened to kill Ms Lauder and raped her before saying: "Don't tell the police and papers like you did last time."
He also threw a newspaper over her face as he got dressed and fled.
DNA evidence from the two sex attacks was preserved by police forensics until advancements were made to DNA testing, the detective said.
In 2022, he said the samples were tested and a familial match was found, which led them to Martin.
He was not arrested and charged over the incidents until January 24, which Det Kelly said was due to delays in comparing Martin's DNA with the sample.
Martin is due to return to Melbourne Magistrates Court in April.
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