Republican Randy "Duke" Cunningham, 63, who represents President George W Bush's party for the California town of Escondido, pleaded guilty in court to conspiracy and tax evasion.
He resigned from the House of Representatives after making the plea.
"I'm resigning from the House of Representatives because I've compromised the trust of my constituents," Cunningham told reporters outside court.
"The truth is I broke the law, concealed my conduct and disgraced my office.
“I know that I will forfeit my freedom, my reputation, my worldly possessions, most importantly, the trust of my friends and family," Cunningham said, his voice cracking.
Cunningham admitted taking money from a military contractor in return for supporting the firm's drive to secure US Defence Department contracts.
He also admitted charges of mail fraud, wire fraud and tax evasion for under reporting his income in 2004.
The eight-term congressman, decorated Vietnam War fighter pilot and a member of the House Defence Appropriations Subcommittee, now faces a maximum of 10 years in prison.
He’ll be sentenced on February 27 2006.
US Attorney Carol Lam said Cunningham had violated the trust of the voters who put him in office.
"It is a crime of really the worst magnitude," Ms Lam said.
She said the evidence that Cunningham received bribes from several co-conspirators between 2000 and 2005 was "fairly overwhelming".
Prosecutors did not name the defence contractors.
Bribes
The bribes were paid in a variety of methods, including checks totalling more than one million US dollars (A$1.35 million), cash, rugs, antiques, furniture, yacht club fees, boat repairs, moving costs and vacation expenses, authorities said.
Among other things, prosecutors said, Cunningham was given $US1.025 million ($A1.38 million to pay the mortgage on his mansion, $US13,500 ($A18,200) to buy a Rolls-Royce and $US2,081 ($A2,800) for his daughter's graduation party at a Washington hotel.
Cunningham was charged in a case that grew out of an investigation into the sale of his home to defence contractor, Mitchell Wade for the inflated price of US$1,675,000.
Mr Wade sold the house nearly a year later for $US975,000 ($A1.32 million) - a loss of $US700,000 ($A944,796.87).
Prosecutors did not specify if the house purchase was part of Cunningham's guilty plea.
In addition to buying Cunningham's home, Mr Wade let him live rent-free on the yacht, the Duke Stir, at a yacht club.
Mr Wade's company, MZM Inc., also donated generously to Cunningham's campaigns.
Around the same time, MZM was winning defence contracts.
Cunningham was allowed to remain free while he awaits sentencing.
He also agreed to forfeit his mansion, more than $US1.8 million ($A2.43 million) in cash, and antiques and rugs.
The congressman had already announced in July, after the investigation became public, that he would not seek re-election next year.
But until he entered his plea, he had insisted he had done nothing wrong.
Special election
Cunningham’s resignation will trigger an election for his seat.
Under California law, candidates will all appear on the same ballot in a special primary election to be held in January.
If no-one receives more than half of the votes, a general election of the top vote getters, will be held in March.
Despite Cunningham’s admission of guilt, the seat is considered to pull in a strong Republican vote.
"It is a Republican seat," Carl Forti, a spokesman for the National Republican Congressional Committee told CNN.
"Even before the resignation, Democrats didn't have anybody running, and I wouldn't expect that to change," he added.
Republican scandals
Cunningham's plea came amid a series of Republican scandals.
Representative Tom DeLay of Texas had to step down as majority leader after he was indicted in a campaign finance case.
A stock sale by Senate Majority Leader Bill Frist is being looked at by regulators.
And Vice President Dick Cheney's chief of staff was indicted in the CIA leak case.