The unnamed soldier had initially claimed he returned fire at a man armed with a pistol.
"However, following an intensive investigation by the military police of the Southern Command, the soldier admitted to shooting in proximity to an unarmed civilian in order to deter him," an army statement said.
"At this stage, the criminal investigation of the incident is still continuing," it added.
But the ISM has said it wants an independent investigation, charging that one undertaken by the army "will not be impartial".
Hurndall spent nine months in a
And Tom's mother, Jocelyn, told Aljazeera.net last month she wanted "the Israeli soldiers responsible for harming Tom to know that they can't shoot people with impunity.
"We want to pave the way for Palestinian people to have some legal redress when they are shot and injured by the Israeli army just like my son was".
She added her family had little confidence in the probe and had taken matters into its own hands by personally investigating Tom's shooting.
Several ISM activists have been wounded by the army in the course of the Al-Aqsa Intifada.
Rachel Corrie death
An army investigation into the death of 23-year-old US national and ISM activist Rachel Corrie concluded her being crushed to death by an Israeli bulldozer had been an "accident".
It said it would not take any disciplinary action against the soldiers involved.
Corrie had been trying to prevent the demolition of a Palestinian home.
In both Hurndall's and Corrie's cases, witnesses insisted they had been easily identifiable by their fluorescent orange jackets.