Daniel Leer, 27, from Lawson Road, Henley-on-Thames, Oxfordshire, appeared at Oxford Magistrates' Court and pleaded not guilty to one count of indecent exposure.
During the 15-minute hearing the court, including the District Judge, broke into giggles as Leer's exploits were outlined.
On July 10, as the torch was carried through Leer's home town of Henley, the waiter took to the streets himself, carrying his own version of the Olympic flame, just minutes before the real version was handed to celebrated rower Sir Steve Redgrave.
Leer, who works as a waiter, accepts he ran a short distance close to the Olympic flame in Henley on July 10 wearing nothing but trainers, with Free Tibet written on his back and holding a replica torch.
He indicated he was willing to plead guilty to an offence under Section 5 of the Public Order Act, but disputes that his actions were sexual in nature or that they caused distress to onlookers.
Sally Thomson, for the defence, said: ''Indecent exposure is a charge for people who jump out of bushes and try to alarm women who are out walking on their own.
''It does not suit the circumstances of this incident.''
Ms Thomson said her client's actions had caused ''hilarity not distress'' to the crowds who were present.
She said: ''He (Leer) had the words 'Free Tibet' written on his back and it was partly a political protest.
''His intention was to draw attention to the issue of Tibet.''
She also denied that her client was drunk or that his eyes were glazed over when he was arrested immediately after the incident.
Sarah Mackay, for the prosecution, indicated that, in her view, indecent exposure is the correct charge and District Judge Lynne Matthews set a trial date for October 30 at Oxford Magistrates' Court.
Leer is on bail but a hearing will take place at the same court tomorrow to determine whether there is any change to his bail conditions.
These include remaining 100 metres away from the River Thames unless travelling by Underground or for work reasons and remaining away from the City of Westminster and the City of London between July 10 and September 3.
Asking Ms Thomson what new bail conditions her client would be seeking, District Judge Matthews said: ''How about if he is not allowed to visit those places unless fully clothed?''
The torch was about to be taken on the river by Sir Steve Redgrave when the incident took place.
Video clips, apparently shot with a mobile phone, appared on the internet almost instantly.
Afterwards, the torch was carried on a rowing boat along the Thames by Sir Steve, a five-times Olympic rowing gold medallist, who travelled through Henley in an eight-man boat using an oar with one hand.
The 70-day Olympic Torch Relay, which has seen the flame travel the width and breadth of the UK, will come to an end on Friday when the flame arrives at the Olympic Stadium in Stratford, east London.
By the time it reaches its destination it will have been carried for 8,000 miles by 8,000 torchbearers through more than 1,000 communities.