Court of Queen's Bench Justice June Ross granted Khadr bail last month, but the federal government appealed that decision.
Alberta Court of Appeal Justice Myra Bielby heard arguments on Tuesday from Khadr's lawyers and from a federal prosecutor seeking an emergency stay of the lower court ruling.
Bielby is expected to make her decision today on whether to grant that stay or to release Khadr.
Bail conditions were set during a separate hearing on Tuesday.
If he is granted bail, Khadr would have to continue counselling and would live with his lawyer, Dennis Edney, under a curfew from 10 p.m. to 7 a.m.
Interaction with his family could only be made by telephone or video conference, and the conversations would have to be in English, and be supervised. Any face-to-face visits with his family could only happen with prior written approval from a supervisor.
Khadr would be prohibited from any communication with members of a terrorist group. He could not apply for a passport, and his internet access would be limited and monitored.
A psychological assessment written last month found Khadr presented a "low-moderate" risk to commit future violent crimes — as long as he stays away from "individuals or organizations involved in extremist or terrorist activities."
Entered as evidence at Khadr's bail hearing, the assessment portrays the 28-year-old as a good prisoner who stayed out of trouble during almost 13 years of incarceration. The report said he followed his "correctional plan," and accepts what he did.
"It is unlikely that Mr. Khadr will engage in generally violent behaviour (e.g. robbery, bar fights, etc.)," a prison psychologist at Bowden Institution wrote in a report dated April 9.
Born in Toronto, Khadr was 15 when he was captured by American soldiers in Afghanistan in July 2002. He spent nearly 10 years in a U.S. military prison in Guantanamo Bay, Cuba.
In 2010, he pleaded guilty to five war crimes, including the murder of an American special forces soldier, before a U.S. military commission. He has insisted he only pleaded guilty to those crimes to get out of Guantanamo Bay.
Khadr was transferred in September 2012 to the Millhaven Institution, a maximum-security prison, in Bath, Ont. He was later transferred to Alberta, where he has been held in a minimum-security unit at Bowden Institution near Innisfail.