"I want you to know that I have been dishonest and you have the right to be angry with me," she said outside the courthous in White Plains, New York.
"I have let my country down and I have let myself down."
Jones had previously, for several years, denied using performance enchancing drugs.
She announced her immediate retirement from athletics.
"Because of my actions, I am retiring from the sport of track and field, a sport which I deeply loved."
Jones told the court she swallowed tetrahydrogestrinone, or THG, a drug also known as "the clear", which she said had been given to her by Trevor Graham, her former coach.
|"I have let my country down and I have let myself down"|
In a statement read out in court, she admitted using the drug between September 2000 and June 2001.
"I consumed the substance several times before the Sydney Games," she told Kenneth Karas, the presiding judge.
"He [Graham] told me to put it under my tongue and to swallow it."
Jones pleaded guilty to two criminal charges – of lying to federal investigators about her steroid use and lying to them about a separate cheque fraud case.
She faces up to six months in prison under a plea agreement with prosecutors.
The two charges of lying to a federal agent normally carry a combined maxiumum sentence of 10 years.
Fall from grace
Jones was released on bail, she surrendered her passport, and will be sentenced on January 11.
She was once feted as the greatest female athlete in the world.
She was one of the stars of the Sydney Olympic, winning the gold in the 100m, 200 m and 4x400m relay, and took the bronze in the long jump and 4x100m relay.
Dick Pound the chairman of the World Anti-Doping Agency, said he expected the International Olympic Committee (IOC) to move quickly and strip Jones of those medals.
Peter Ueberroth, the chairman of the US Olympic committee said, "Ms Jones has cheated her sport, her teammates, her competitors, her country and herself.
"She now has an opportunity to make a very different choice by returning her Olympic medals, and in so doing, properly acknowledge the efforts of the vast majority of athletes who choose to compete clean."
|Jones was once considered the best female athlete in the world [File: AFP]|
Jones is already under investigation by the IOC for suspicion of using steroids. Jacques Rogge, IOC president, called it "a sad day for sport".
Jones becomes the first athlete convicted in connection with the probe into the San Francisco-area laboratory BALCO, the centre of a doping scandal that has tarnished the reputations of leading athletes in baseball, American football and athletics.
In 2004, she said she had "never, never" used performance-enhancing drugs and that "I have accomplished what I have accomplished because of my God-given abilities and hard work".
In court, she said Graham received "the clear" from Victor Conte, BALCO's head and one of five men previously convicted for their roles in distributing steroids, including the personal trainer of Barry Bonds, the baseball star.
Jones said she believed at first the substance was flaxseed oil and continued to use it until July 2001, after which she said she realised she was unable to train as intensively and did not recover as quickly afterward.
By November 2003, when interviewed by federal investigators, Jones knew she had taken THG, but when shown a sample by investigators she said she had never seen it before.
"This was a lie, your honour, as I knew I had taken the substance," she told the judge.
Soon after Jones' dominating performance in Sydney, her reputation came into question as those around her were ensnared in steroids controversies.
CJ Hunter, her then-husband and the 1999 world shot put champion, tested positive for steroids in 2000.
Tim Montgomery, former world record holder in the 100 metres and father of one of Jones' children, was banned for two years by the Court of Arbitration for Sport after evidence showed he had taken THG.