Romain Franck, a French citizen, was charged last month along with several Palestinian suspects with belonging to a gun-running network that sold the weapons to arms dealers between November and February.
According to prosecutors, Franck took advantage of reduced security checks for consular vehicles to transport the weapons out of the Palestinian enclave.
Israel's Shin Bet internal security service said Franck was motivated by money, with the indictment alleging he was paid a total of around €5000.
At the Beersheba district court on Sunday, judge Nasir Abu Taha ordered that Franck remain in custody for the duration of his trial, after his attorney Abed Abu Amir agreed there was "alleged evidence" against his client, court documents read.
Speaking with reporters after the hearing, Abu Amir said Franck was being kept in custody because he could not meet the conditions for house arrest: two guarantors staying with him around the clock.
"We have one person and he can't stay with him all the time," he said. "We hope soon to find another guarantor and we can bail him out."
Abu Amir said prosecutors had yet to share all their material with the defence but so far had produced no physical evidence.
Their case, he said, was "based on a confession given by him and the Palestinian guys who were arrested."
"They didn't recover even one single bullet," Abu Amir said. "There is no gun, no nothing."
Those entering and exiting the Gaza Strip through the Erez crossing with Israel undergo strict security checks by Israeli authorities, but these measures are eased for diplomatic visitors.
The Palestinian enclave, home to some two million people, is sealed off from Israel by a wall and fencing.
Israel and Palestinian militants in Gaza have fought three wars since 2008.
Israeli authorities carry out regular operations to seize weapons in the West Bank, which has been under Israeli occupation since 1967.