Asif Zardari told a meeting of former senior civil servants in Islamabad, it was time to be honest about their deployment.
"Let us be truthful to ourselves and make a candid admission of the realities," he said. "The terrorists of today were the heroes of yesteryears until 9/11 occurred and they began to haunt us as well."
These groups were not thrown up because of government weakness, but as a matter of policy. He said they were deliberately "created and nurtured" as a policy to achieve some short-term tactical objectives.
His comments amount to an admission that Pakistan trained Islamic terrorists to launch attacks on India as part of its long war over its claim on Kashmir.
It came as at least 40 people were killed in a suspected US missile strike in north-west Pakistan.
Three US drones are believed to have fired missiles at militants near Ladha in South Waziristan. It is the third strike in two days and follows strikes in which 19 reportedly died.
Mr Zardari first confirmed that many of the Islamic militants now waging war against his government were once "strategic assets" in an interview with the Daily Telegraph earlier this week.
"I don't think anybody in the establishment supports them any more. I think everybody has become more wise than this," he said and confirmed the military was now targeting those it had previously used as proxies in attacks on India.
Islamic militant groups like Lashkar-e-Taiba and Jaish-e-Mohammed, have long been regarded as Pakistan proxy forces by diplomats and intelligence services but Islamabad has, until now, always denied any links.