"I assume all responsibilities having to do with the fact that I had a relationship with (the mother of the child), and I recognize paternity," The Times Online quoted Lugo as saying during a televised speech.
Up to that point, the 57-year-old leader had denied 26-year-old Viviana Rosalith's claim that he was the father of her child. Her lawyers had filed a paternity suit against Lugo last week, The Times said.
Lugo was elected president last April, ending the South American nation's six decades of one-party rule. Before that he was a bishop for 10 years.
Rosalith contended in her lawsuit that she met Lugo while he was a bishop in San Pedro and staying at her godmother's house.