The separatists only realised their fatal error when they searched the crash site and discovered the bodies of women and children.
"We shot down a Kiev plane, our superiors told us," the rebel told Corriere Della Sera.
"We thought we were looking for bailed-out Ukrainian pilots but instead we found dead civilians.
"All those poor people with baggage that certainly wasn't military… I was looking for a parachute and found the body of a little girl."
Until now both Moscow and the separatist forces it supports have denied downing the passenger plane as it flew from Amsterdam to Kuala Lumpur a week ago.
Many Russian officials have suggested Ukraine staged the attack to smear the rebels who are seeking to break away from Kiev.
The Italian newspaper spoke to the 31-year-old fighter at Torez railway station, where the bodies of those killed in the crash were stored before being transported to the city of Kharkiv.
They were reportedly told white objects, thought to be parachutes, were seen dropping to earth.
Commanders ordered the separatists to prepare for battle with the plane's survivors, still thinking they had downed a Ukrainian jet.
"All of a sudden, I saw scraps of material in a clearing," the rebel added.
"That was when I realised it was a civilian plane. Not a military one.
"And all these dead people were civilians. A heap of burst suitcases confirmed it."
Meanwhile an international team in Hampshire has already begun to analyse MH17's cockpit recordings.