D'Souza, 53, had in January pleaded not guilty to charges brought by Manhattan's top federal prosecutor India-born Preet Bharara and was scheduled to go on trial from May 19.
He, however, decided to change his plea and on Tuesday admitted during a hearing in Manhattan federal court before District Judge Richard Berman that he made two close aides to contribute USD 10,000 each to the senate campaign of Republican Wendy Long in 2012 with the understanding that he would reimburse them for their contributions.
He admitted that he knew what he was doing was wrong and something the law forbids. The court then accepted the guilty plea. "I deeply regret my conduct," he said in court.
"I knew that causing a campaign contribution to be made in the name of another was wrong and something the law forbids," he added.
The Mumbai-native faces a maximum sentence of 2 years in prison but according to his plea deal with prosecutors, the advisory sentencing guidelines call for a term in the range of 10-16 months when he is sentenced on September 23.
Apart from being charged with one count of causing to make USD 20,000 in illegal campaign contributions to Long's campaign, D'Souza was also charged with one count of making false statements to the Federal Election Commission in connection with the illegal campaign contributions.
Under the plea agreement, the prosecutors would dismiss the false statements count when D'Souza is sentenced.
Last week, Berman had denied a pretrial motion by D’Souza to dismiss the indictment.
D'Souza had alleged that he was being targeted for "selective prosecution" since he had been a critic of Obama.
Bermna had ruled that there was "no evidence" to support D’Souza's allegation that he was being prosecuted because of his outspoken criticisms of the President.
"Following the court's ruling denying Dinesh D'Souza's baseless claim of selective prosecution, D'Souza now has admitted, through his guilty plea, what we have asserted all along -- that he knowingly and intentionally violated federal election laws," Bharara said in a statement.
D'Souza's lawyer Benjamin Brafman said that "Given the technical nature of the charge, there was no viable defence."
"We are hopeful that Judge Berman will recognize D'Souza to be a fundamentally honorable man who should not be imprisoned for what was an isolated instance of wrongdoing in an otherwise productive and responsible life," he said.
Long, who has been a friend of D'Souza's from their college days at Dartmouth in the 1980s, issued a statement after learning about D'Souza's plea and said she was heartbroken" about the case.
D'Souza, who is also a best-selling conservative author, had come in for severe criticism for his 2012 documentary '2016: Obama's America', a documentary that had equated reelection of Obama with the death and dismemberment of the US and had been running at number three on the top movies list when it was released.
Image: Conservative commentator and best-selling author, Dinesh D'Souza exits the Manhattan Federal Courthouse after pleading guilty in New York
Photograph: Lucas Jackson/Reuters
British cleric Abu Hamza convicted on terror charges in US
US entrepreneurs expect Modi to revive business relations
UN chief hopes Modi attends UNGA; climate change summit
Bin Laden's son-in-law found guilty on terror charges
'Modi's Facebook popularity second only to Obama'