Bryan Christopher Mc Manus entered a guilty plea as he appeared at Belfast Crown Court on Wednesday.
McManus, 56-year-old, admitted possessing eight handguns, including one disguised as the handle of a walking cane, a rifle, component parts of weapons, and seven magazines and assorted ammunition with intent to endanger life.
The engineer from Aileen Terrace in the city also pleaded guilty to conspiring with another person to convert imitation guns into firearms between September 2007 and 2010.
He is further charged with possessing property for a terrorist purpose, including a book entitled 'Home Workshop Prototype Firearms', blank cartridges, and a lathe.
It is understood to be the first time a charge of terrorist fundraising will be successfully prosecuted in Northern Ireland.
Detectives uncovered the guns and ammunition at outbuildings behind McManus's Newry home in September 2010.
He had previously admitted that the large scale munitions factory had been manufacturing and modifying component parts for guns on behalf of dissident republican terrorists since 2008.
Although McManus did not name the terrorists, he suspected they were connected to the Real IRA.
Police welcomed McManus's guilty plea and said the seizure of the weapons undoubtedly prevented the commission of serious offences.
Judge David McFarland granted him bail but said that was "no indication" of the sentence he would face next month.