Vasily Gritsak, head of the Ukrainian Security Service, has told reporters the agency faked Mr Babchenko's death to catch those who were trying to kill him.
During the news conference Wednesday, Babchenko apologized to his wife and all those who believed he had been killed - but said the secrecy had been unavoidable.
In a story May 29 about a Russian journalist killed in Ukraine, The Associated Press and other media organizations reported, based on fabricated information from Ukrainian authorities, that Arkady Babchenko was shot and killed.
His reported murder had triggered a war of words between Ukraine and Russian Federation and sent shivers through the journalistic communities in both countries.
"Special apologies to my wife", Babchenko said at the press conference, according to BBC.
Earlier, Ukrainian state news agency Ukrinform had said that Babchenko, 41, was shot in the back and died in an ambulance, citing his friend and supervisor, Ayder Muzhdabaev, deputy general manager of Ukrainian TV channel ATR.
Babchenko, a prominent war correspondent, is extremely critical of Russia's annexation of Crimea, and was forced to flee Russian Federation in February 2017 because of threats to him and his family. He spoke about leaving the country a year ago because of repeated threats against himself and his family.
Babchenko made a name for himself with his poignant reportages from the frontlines, including the conflict in eastern Ukraine that has killed more than 10,000 people.
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Kyiv police chief Andriy Krishchenko said in televised comments late on May 29 that police were assuming Babchenko was targeted for his work.
"From Babchenko's position, even his Moscow colleagues looked this way: weak, conformist, inclined to endless compromises", Russian journalist Yury Saprykin wrote on Meduza, an independent news site.
"Ukraine is becoming the most unsafe country for reporters", Russian lawmaker Yevgeny Revenko said in remarks carried by the state RIA Novosti news agency.
Babchenko left Russian Federation previous year and had told people that he feared for his life.
Kremlin critic Arkady Babchenko has been seen in Ukraine.
The Ukrainian security service also said that Russian Federation intelligence paid an assassin $30,000 to carry out the hit, and that the would-be assassin had been apprehended. "In Russia, dissidents like me are harassed with impunity".
Mr Babchenko served in the Russian army and fought during the first separatist war in Chechnya during the 1990s.
He relocated to Kiev, where he began working for a Crimean television station and produced coverage critical of Russia's military actions in the region.