The 54-year-old had earlier pleaded not guilty to three charges over claims she held a PhD from the London School of Economics (LSE) -- credentials she used when applying for New Zealand public service jobs in 1989, 1998 and 2004.
But in Wellington District Court yesterday, Thompson changed her plea to one charge in a deal which saw the other two dropped.
Judge Bruce Davidson said Thompson could be given 100 hours community work and fined $10,000 when she is sentenced next month.
Thompson had earlier faced two charges of using a document with intent to defraud and one of dishonestly attempting to use a document without claims of right.
At a depositions hearing last year, the LSE said Thompson was never conferred a doctorate, though it had received three bound copies of her thesis.
Court documents released at the time said Thompson had told government officials in interviews that she believed she had a PhD, but found out in 2004 that she did not.
She told police in an interview she believed "in her head" she had been awarded the degree, but acknowledged she had not been awarded either a Masters or a Doctorate degree.
Thompson's lawyer, Robert Lithgow, told the depositions hearing his client was not aware she had to go to the LSE for an oral exam to complete her PhD.
Judge Davidson said Thompson had worked in senior positions and had been offered promotions, and was therefore not in the same category as those who fraudulently claimed higher qualifications but could not live up to them in the job, he said.
Mitigating factors in sentencing would include the significant damage to Thompson's reputation, future career prospects and finances.
The public scrutiny she had received could be seen as punishment in itself and her future in the public service looked bleak, he said.
Thompson resigned from her senior position in the Labour Department in 2008 after being accused of a conflict of interest for helping her Kiribati relatives to gain residency in New Zealand.
She will be sentenced in late March.
