Stein, 33, has pleaded not guilty to murdering the nine-year-old in January 2022 as he stands trial in the NSW Supreme Court.
Charlise Mutten was reported missing from a property at Mount Wilson, in the Blue Mountains west of Sydney, where she was staying with Stein and her mother Kallista Mutten.
Her body was found four days later in a sand-filled barrel on the banks of the Colo River. She had been shot twice.
The trial has been told of a conversation about Charlise's disappearance during a bushland search. (Steven Saphore/AAP PHOTOS)
A resident of a neighbouring property, Jane Hutt, on Thursday told the court she met Charlise on January 3 when she went for dinner with Stein, Ms Mutten and the girl.
Ms Hutt described Charlise as being "very loving and affectionate" with her mother.
"I think they were cuddling ... she was affectionate with us too," she said.
"She seemed really chatty and comfortable with adults."
When the search for the missing girl entered its third day, Ms Hutt initiated a conversation with Stein in which she asked if he knew where the nine-year-old was, the court heard.
"He got up and started to get very agitated and straight away he goes 'Kallista has done something with the girl'," Ms Hutt said.
"I said something along the lines of, 'well where do you think, what do you think Kallista has done?'."
Stein allegedly told her that Ms Mutten wanted to keep Charlise and not return her to her grandparents, adding that the girl was taken by one of her mother's associates.
"She didn't want to give the girl back," Stein said, according to Ms Hutt.
"She wanted the three of us to run away," he allegedly added.
"That would be the easiest way for me to go back to jail."
Stein was tracked driving to several locations across Sydney after Charlise's disappearance, allegedly with the barrel containing her remains on the back of his ute.
Ms Hutt said she noticed nothing unusual happening in the area in the days before the girl's disappearance was reported to police by Ms Mutten on January 14.
On that day, Ms Hutt said she had a conversation with Stein's mother, Annemie.
"(She) said to me, 'I need a drink'," Ms Hutt told the jury.
"She did tell me it was Charlise who went missing."
The trial continues.
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