The Navy able communications technician died after a night-time dive at the Devonport Naval Base. He was 23.
He was diving in about 6 to 8 metres of water on March 25, about 10pm, during advanced training.
Following an investigation, WorkSafe filed the representative charge against the NZDF under the Health and Safety at Work Act.
The charge alleged failures exposed five other sailors to risk of death or serious injury during the same exercise.
In a statement today a NZDF spokesperson said: "Our guilty plea is an acknowledgment of the failings on our part that led to Able Diver Yarwood's death and that exposed his dive colleagues to risk."
The Royal New Zealand Navy will comment in full once sentence has been passed.
"We would once again like to offer our condolences to Able Diver Yarwood's fiancée, parents and brothers," the NZDF spokesperson said.
Yarwood's brothers Max and Tom Yarwood, along with closest friend Ben Harding, previously said he had been truly passionate about serving his country and protecting New Zealand freedom.
A driven young man, he had already gained a collection of medals including the NZSOM, NZGSM and NZDSM.
"He was fiercely protective of his parents, brothers and fiancee Emily Parr," his mother Liz Yarwood previously said.
"He was extraordinary from the word go, as a baby, toddler, teenager and an even more extraordinary young man."
Yarwood joined the Royal New Zealand Navy at just 17, taking his oath with sincerity, pride and a fierce tenacity, his family said.
