The admission increases pressure on the British government to track its previous arms sales to Saudi Arabia.
A spokesman for the coalition fighting in Yemen says while cluster bombs will no longer be used, they were dropped on what he calls "legitimate military targets."
He says it happened between December 2015 and January 2016.
And British defence secretary Michael Fallon has confirmed what many advocacy groups already suspected: that cluster bombs made in Britain have been used.
Mr Fallon says the Saudi-led coalition, waging a war against the Houthi rebel movement, dropped munitions Saudi Arabia purchased in the 1980s.
Andrew Smith, from the British-based Campaign Against the Arms Trade, has explained to Al Jazeera why the weapon is so deadly.
"When a cluster bomb explodes, it blows up into hundreds of little parts, capsules, which can explode and kill indiscriminately, whether it's men, women or children. They can last for years to come as well, and they can have a devastating impact for many years ahead."
It has been illegal under British law to supply cluster bombs to anyone since 2010.
The British government says cluster bombs have not been supplied to Saudi Arabia -- who it backs in the war in Yemen -- since 1989.
Andrew Smith says such a bombing campaign poses a huge risk to civilians.
"We've seen humanitarian crisis unleashed on Yemen. For some time now, there's been serious allegations of cluster bombs being used. But it's not just the bombs themselves which are deadly. It's also the mindset which has allowed them to be used in the first place. And it's military strategy which has allowed them to be used in the first place."
At least 10,000 people have been killed and three million displaced since the war in Yemen began nearly two years ago.
The capital, Sanaa, remains controlled by the Iranian-backed Houthi rebels, making the city of Aden the de facto capital of the Saudi-backed Yemen government.
United States Secretary of State John Kerry and the Saudi foreign minister are key figures in the fight against the self-proclaimed Islamic State in the region and held talks this week.
Mr Kerry says the two countries are continuing to work towards achieving peace in Yemen.
"You can see from the humanitarian situation, which is dire and deteriorating rapidly, that it is urgent that we try to bring this war to a close. But we also need to bring it to a close in a way that protects the security of Saudi Arabia, that takes these missiles away from a threat to the border, that reduces the capacity for terrorists to come into the country and assault people, kill people, in their villages."
The high number of civilian casualties from the Saudi bombing campaign prompted the United States to halt its arms sales to the region last week, though.
Britain has not done the same yet.
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