Otto Warmbier, a 21-year-old University of Virginia student, said he was asked by a US church to bring back the “trophy”.
He had been on a tourist trip to North Korea in January.
Otto Warmbier was arrested on 2 January as he was about to leave.
At the time, North Korea said the US government had “tolerated and manipulated” the student.
Otto Warmbier was charged with committing a “hostile act”.
At a news conference in Pyongyang, Otto Warmbier said a member of the Friendship United Methodist Church had promised to give him a used car worth $10,000 if he brought back a propaganda sign from his North Korea trip.
“I committed the crime of taking down a political slogan from the staff holding area of the Yanggakdo International Hotel,” North Korea’s KCNA news agency quoted Otto Warmbier as saying.
“The aim of my task was to harm the motivation and work ethic of the Korean people. This was a very foolish aim,” the student was quoted as saying.
Otto Warmbier said his crime was “very severe and pre-planned” and that he “never should have allowed myself to be lured by the US administration to commit a crime in this country”.
CNN, which received a copy of the video, said Otto Warmbier sobbed as he begged for forgiveness, saying he had made “the worst mistake of my life”.
It was not clear whether Otto Warmbier had made the statement voluntarily, but foreign detainees in North Korea have previously recanted confessions, saying they were made under pressure.
The US state department strongly advises Americans against travelling to North Korea, which sometimes uses the detention of foreigners as a means of exerting pressure on its adversaries.
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