"It was my mistake. People might call me stupid and dumb for making that mistake but that's my problem."
He said he was arrested and tortured by the Pakistani military, who accused him of being a spy.
During the torture he said the word "jihad" (holy war) due to the pressure he was under, he said.
"I haven't been taken to court, I haven't been charged or anything. It's all just basically a completely made up story to make me look bad."
This afternoon John Key confirmed Mr Taylor was in New Zealand at the moment.
"For reasons that you'll appreciate, I can't go into great detail about Mark Taylor. All I can say
is that he's known to us, he's someone that has quite a number of restrictions on him for very good reasons.
"I know him and his name very well.''
When asked if New Zealanders had anything to fear from him, Mr Key said: "I don't believe so, no.''
Mr Key, who is the minister responsible for the Security Intelligence Service, did not want to comment further.
The cable says Mark John Taylor, 38, also went by the name T. al- Rahman.
The US Embassy in Canberra recommended his name be placed on a "selectee'' list - rather than the no-fly list - "due to his demonstrated connections with al-Aulaqi''.
"This recommendation is based also on his current location being Australia, where Australian (and possibly New Zealand) authorities can monitor his whereabouts and travel plans.''
Asked what he would say to Mr Key if given the chance, Mr Taylor said: "I'd say 'where's your evidence, I want 100 per cent evidence put on the table'. I'd say 'thank you very much for ruining my life', that's what I'd stay to him."
