Rumsfeld told reporters he was mistaken in the earlier assertion.
"I don't have knowledge as to whether it's been stopped. I do have knowledge it was put under review. I was correctly informed, and I just misstated the facts," Rumsfeld said at a Pentagon news briefing.
Rumsfeld had said in a speech in New York last Friday and in a television interview the same day that the contentious practice had been stopped.
He said Gen. George Casey, the top U.S. commander in Iraq, was reviewing the practice. Casey has said he saw no reason to stop it.
Last week, Rumsfeld all but admitted that the U.S. military is.
Rumsfeld said al Qaeda and other Islamic extremist groups have poisoned the Muslim public's view of the United States through deft use of the Internet and other modern communications methods that the American government has failed to master.
"Our enemies have skillfully adapted to fighting wars in today's media age, but for the most part we, our country, our government, has not adapted," he said.
He quoted Ayman al-Zawahri, the chief lieutenant of al Qaeda leader Osama bin Laden, as saying that their terrorist network is in a media battle for the hearts and minds of Muslims. Rumsfeld agreed, saying that the battle for public opinion is at least as important as the battles on the ground in Iraq and Afghanistan.
On Tuesday, Rumsfeld also spoke about mixed signals coming from Iraqi leaders over the type of government they would like eventually to see take shape in Iraq.
"Iraqis are going through a political process," Rumsfeld said. "Until they agree on who their new leadership should be, you're going to see a lot of public statements by a lot of people ... reflecting a lot of different views."
Iraqi political parties have run into major obstacles in talks on a new national unity government. Any major delay would be a setback to U.S. hopes for a significant reduction in troop levels this year.
British Foreign Secretary Jack Straw said earlier Tuesday in Baghdad that the results of the Dec. 15 parliamentary elections showed the Iraqi people want a "broad government of national unity" to bring together "all the different elements" of Iraqi society.
He spoke after meeting with Prime Minister Ibrahim al-Jaafari and other Iraqi leaders.
Al-Jaafari has said formation of the government was more complicated "because this time the Arab Sunnis are participating in the political process."
Rumsfeld also said he had no problems with a deal that would let a United Arab Emirates company . The plan has met with stiff political opposition in Congress.
He called the UAE a good military partner in the fight against terror.
"Nothing changes with respect to security under the contract. The Coast Guard is in charge of security, not the corporation," Rumsfeld said.
Earlier Tuesday, Pentagon spokesman Bryan Whitman said Rumsfeld had been incorrect in his statements Friday that payments for positive stories in the Iraqi media had been stopped after negative publicity in the United States.
An official inquiry into the program by Navy Rear Adm. Scott van Buskirk has been completed, but its results have not been released.
In his New York speech to the Council on Foreign Relations, a foreign-policy think tank, Rumsfeld raised the issue as an example of the U.S. military command in Baghdad seeking "nontraditional means" to get its message to the Iraqi people in the face of a disinformation campaign by the insurgents.
"Yet this has been portrayed as inappropriate, for example, the allegations of someone in the military hiring a contractor, and the contractor allegedly paying someone to print a story, a true story, but paying to print a story," he said during his speech.
"The resulting explosion of critical press stories then causes everything, all activity, all initiative, to stop, just frozen," he added.
In an appearance Friday on PBS' "The Charlie Rose Show," Rumsfeld said he had not known about the practice of paying for news stories before it became a subject of critical publicity in the United States.
"When we heard about it, we said, `Gee, that's not what we ought to be doing' and told the people down there," he said.
Although "it wasn't anything terrible that happened," Pentagon officials ordered a halt to the practice and "they stopped doing it," he said, according to a transcript provided by the show.