Rusesabagina says he is not responsible for the attacks it conducted against Rwanda.
He is charged with 13 counts related to terrorism, arson, kidnap and recruiting of child soldiers.
Paul Rusesabagina has for the first time admitted in public to being part of an opposition group that formed a rebel wing that claimed a spate of attacks in Rwanda which left civilians dead.
During his bail appeal hearing at the Nyarugenge Intermediate Court in Kigali on Friday, Mr Rusesabagina, the 'Hotel Rwanda' film hero credited for saving over 1,200 people during the 1994 Genocide against the Tutsis, said that whereas Force de Liberation Nationale (FLN) was created as a military wing, he is not responsible for the attacks it conducted against Rwanda.
"We formed the FLN as an armed wing but not as a terrorist group as the prosecution claimed. We formed it in order to draw the government to the attention of the plight of Rwandan refugees all over the world. We never created it to commit terrorism.
"I do not deny that the FLN committed crimes but my role was diplomacy," he told the court.
"The agreement we signed to form MRCD (Mouvement Rwandaise pour le Changement Democratique) as a political platform included the formation of an armed wing called FLN. But my work was under the MRCD political platform and I was in charge of diplomacy. The FLN armed wing was led by General Wilson Irategeka."
Mr Rusesabagina is charged with 13 counts related to terrorism, arson, kidnap and recruiting of child soldiers, crimes linked to his position as chair of MRCD, a coalition of exiled opposition groups formed in July 2017 with a base in Minembwe in neighbouring Democratic Republic of Congo.
Irategeka is a former commander of the Democratic Forces for the Liberation of Rwanda (FDLR) who was killed in February during a military operation against armed rebel groups in eastern DRC by Congolese forces.
Citizenship
Mr Rusesabagina also told the court on Friday that he is not a Rwandan citizen and that he should therefore not be tried in Rwanda.
"Once I left Rwanda, I surrendered all my nationality documents to the Belgium government and I became stateless," he said.
When the judge asked if he ever officially revoked his nationality, his lawyer David Rugaza responded that "before 1999, Rwanda did not have laws that allowed duo nationality. He, therefore, lost his Rwandan nationality when he was awarded Belgium nationality."
Mr Rugaza said that the code of criminal procedure provides detention of a suspect before the trial as a right, not as something that should be considered a usual practice.
"The primary court failed to indicate why it made this exceptional decision to deny him bail yet he was was ready and willing to fulfill all conditions for provisional release, including surrendering cash bail," he said.
"Based on all these reasons, we have strong reasons to believe that the court overstepped its mandate by denying my client bail, and therefore ask this court to nullify the ruling that ordered him to be remanded for 30 days."
The prosecution objected the appeal noting that by his on own admission, Mr Rusesabigana led to the formation of a rebel group accused of attacking and killing civilians in Rwanda.
"It is impossible to separate Rusesabagina from FLN... Rusesabagina has already asked for forgiveness for the crimes that FLN committed. He was the president of MRCD, which formed FLN and he was an active leader at the time when FLN committed so many atrocities against Rwanda," the prosecutors argued.
The prosecution said that bail was denied him by the primary court on the basis of "strong evidence" that was provided against him.
The judge said he would rule on the bail appeal on October 2.