Mr Mullaly, 69, was found fatally stabbed in his makeshift shelter under the Denison Bridge on September 20, 2015.

Chifley Police District crime manager Detective Chief Inspector Luke Rankin said officers arrested a Bathurst man at his home on Monday morning.

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"He was conveyed to Bathurst police station and charged with murder," Inspector Rankin said.

The accused, Steven Shane Greenfield, 38, of George Street, did not appear in Bathurst Local Court on Monday when the matter was mentioned briefly before magistrate Bruce Williams.

Greenfield's solicitor, Evan Dowd, told the court his client had been transferred to hospital and Mr Williams put the matter over until Tuesday.

Greenfield did not apply for bail and was formally refused bail by the court.

Monday's charge comes almost two years to the day since the matter went to inquest before Deputy State Coroner Elizabeth Ryan at Orange Court House.

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Inspector Rankin said the charge was the culmination of a five-year investigation led by local detectives with assistance and consultation from the State Crime Command's Homicide Unit.

He said following the discovery of Mr Mullaly's body in 2015, Strike Force Yenna was established to investigate his death.

Inspector Rankin said Mr Mullaly's family had been notified of the development.