Landowners MMC Estates and Countryside Properties have expressed regret for any 'confusion and concern' caused by their actions or 'misinformation'.
The move will delight local residents who have fought a high-profile campaign to stop the development - which includes a children's nursery - on the ex-Turner and Newall site, in Spodden Valley, Rochdale.
Contrary to earlier reports, in which the MMC's environmental experts Encia had denied there was asbestos in heavy crush rubble, the developers have now confessed 'that there is a significant asbestos contamination in areas of the woodland on the site and- in other parts.'
Michael Drogan, managing director of MMC Estates, said: 'We would like to apologise to local residents for the confusion and concern our actions have caused since our purchase of the site in 2004.
'We recognise that this has brought about a sense of mistrust and has undermined our ability to work with the community.'
He added: 'We are addressing this and plan to communicate more openly and regularly in future.'
The scheme, which has currently been put on hold by Rochdale MBC pending a review of the contamination, has been subject to heavy opposition since being unveiled last year and has even been debated in Parliament.
Jason Addy, co-ordinator of the Save Spodden Valley Campaign, said: 'The developers' 'mistake in communication' is minor when compared to the potential damage to public health if mistakes are made and the contamination is released from the Spodden Valley.'
He added: 'We must have a full, independent investigation of all the facts and issues raised.
'That is why we are calling on the ODPM for an inquiry.'