The sex sadist was due to be released from Ararat jail today after his 10-year maximum sentence expired.
Instead, he will be forced to pay rent and live in a "prison within a prison" inside the jail's walls.
The Adult Parole Board has imposed extraordinary restrictions on Fletcher under the terms of an extended supervision order granted by a Supreme Court judge.
Conditions of the five-year order mean Fletcher will be:
BANNED from leaving his new home inside the jail unless escorted by a Corrections officer.
BANNED from having access to the internet.
FORCED to wear an electronic ankle tag so his movements can be monitored.
BANNED from contact with other sex offenders.
FORCED to take part in treatment programs that he refused to do while serving his sentence.
PROHIBITED from engaging in community activities involving children.
BANNED from visiting certain areas, such as schools, playgrounds, public parks or childcare areas.
Corrections sources told the Herald Sun the only concessions to Fletcher's new status as a "free man" would be the right to wear his own clothes rather than prison uniform, and no requirement to work.
He will be able to receive visitors, but only if they have been approved and are under escort.
Fletcher's maximum sentence for sex offences ended at midnight.
He turned two 15-year-old girls into sex slaves in the name of witchcraft.
He lured them into sex using black magic and hypnotism and told them they were taking part in pagan rituals.
Fletcher was jailed in 1996 after pleading guilty to child prostitution, sexual penetration of a child under 16, indecent acts with a child and perverting the course of justice. He is believed to have been told last weekend he would not be leaving jail as expected. He was served with the extended supervision order yesterday by a Corrections officer, who explained the conditions. The parole board will speak to him by video link tomorrow.
Fletcher, a professed witch, is the sixth sex offender to be placed on an extended supervision order since the Serious Sex Offenders Monitoring Act became law on July 1 last year. The State Government is believed to have received legal advice that forcing Fletcher to live within a jail after his sentence has finished is a lawful direction under the terms of the Act.
Fletcher, 49, was refused parole last January after sexually explicit letters were intercepted by staff at Ararat jail.
The letters convinced Corrections staff and forensic psychiatrists that Fletcher had not been rehabilitated and would almost certainly reoffend.
They were written to people in Ghana and encouraged them to adopt deviant sexual practices in pursuit of his form of religion.
The Herald Sun has learned Fletcher also has serious previous convictions in another name.
He was convicted in the County Court in 1984 of false imprisonment when he was known as Timothy Michael Ryan, believed to be his birth name.
He has also been convicted of indecent assault, managing a brothel and living off the earnings of prostitution.
Fletcher will live in a converted section of a building used for education programs inside Ararat jail.
Another notorious sex offender, Brian Keith Jones -- better known as Mr Baldy -- lives in a cottage outside the jail's gate.
Prison sources said the pair had a strained relationship and there was "some sort of bizarre rivalry between them".
Jones, who was the first released sex offender to be placed on an extended supervision order, was moved back to Ararat after a community uproar over his placement in a Housing Ministry house in Ascot Vale when he left jail last August.
Jones has to comply with 23 conditions, including an internet ban and electronic monitoring, under the terms of his order.
Applications for a supervision order are made to a judge in the court that sentenced the offender and can cover up to 15 years after release.
Conditions can include curfews, bans on contact with children, residential and job restrictions, random checks and compulsory treatment programs.
An offender can be sent back to jail for up to five years for breaching any conditions.
The Government is believed to have already decided to apply for another five-year supervision order against Fletcher when the order granted a fortnight ago expires in 2011.