Leslie Sheahan, 84, offered a "bizarre" and "troubling" explanation for the historical crime, telling police it was a practical joke gone awfully wrong, Ballarat Magistrates Court heard on Tuesday.

Sheahan, who was appointed priest at a Ballarat North church in the mid 1960s, was an assistant priest in the Horsham Catholic Diocese when the offence occurred between 1970-1971.

He pleaded guilty to unlawful/indecent assault of a girl - a historical charge which the court heard predates the sexual penetration of a child charges introduced in 1980s.

Police prosecutor Senior Constable Clint Prebble said the assault occurred upstairs at a pub in Horsham.

Hearing her daughter's screams, the victim's mother confronted Sheahan in the bedroom doorway, where the priest responded: "I think I've frightened her."

In 2006, the victim was awarded funds through the Catholic Church of Australia's Towards Healing program, which responds to complaints of sexual and physical abuse by church personnel.

However, the court heard the victim's father, through a member of parliament, forwarded information onto detectives from Victoria's sexual offences squad, Taskforce Sano.

Sheahan admitted to the offence during police interview in June 2014, stating he used a carrot in an episode of mistaken identity.

Sheahan's lawyer said his client's explanation was as bizarre as his offending.

He said Sheahan, who retired in 2002, was ashamed of his actions and a prison sentence would be onerous on his client given his deteriorating health.

Magistrate Michelle Hodgson said she was "troubled" by Sheahan's reasoning.

"Unfortunately these incidents - historical sex offences by members of the clergy - are all too regular in the region," she said.

Sheahan will be sentenced on March 5.