NEW YORK (Reuters) - A mentally ill British man pleaded guilty on Monday to U.S. terrorism charges and conspiring with radical London cleric Abu Hamza al-Masri to set up a jihadist training camp in Oregon in 1999.

Haroon Aswat, 40, entered his plea in Manhattan federal court as part of an agreement with government prosecutors.

Defense lawyer Peter Quijano had disclosed the outline of the deal in the court earlier this month, saying it would resolve the case ahead of a June 1 trial date.

Under questioning from U.S. District Judge Katherine Forrest before pleading guilty, the soft-spoken Aswat said he had suffered from symptoms of schizophrenia for the last 20 years and was currently being treated for the disorder.

He was diagnosed with paranoid schizophrenia in 2008 while being held at a high-security psychiatric hospital in England, according to court documents.

Barely audible, Aswat said he had traveled to Oregon in 1999 to assist another man, Oussama Kassir, at Abu Hamza's behest, set up a militant training camp in a town called Bly.

"At the time I understood that Abu Hamza and Kassir were associated with an Arab organization that was engaged in terrorist activity and was engaged in terrorism," Aswat said, reading from a prepared statement.

"I later came to know that this Arab organization was known as al Qaeda," he said.

Forrest, who declared Aswat mentally competent before accepting his guilty plea, set his sentencing for July 31 and said he faced a maximum of 20 years in prison.

"Mr. Aswat is clear in his mind," Forrest said, without citing any professional opinion or diagnosis. "He is clearly competent to enter his plea today."

With time served since his arrest in Zambia in 2005 and deportation to Britain, where he was held until his transfer to the United States in 2008, Quijano said he hoped his client would serve minimal additional time behind bars.

The Briton of Indian descent had faced a maximum of 35 years imprisonment if he had been convicted of all the charges filed against him in June 2005.

A jury convicted the one-eyed, handless Abu Hamza in May, and Forrest in January sentenced him to life in prison.

Kassir was convicted in New York in 2009 and sentenced to life in prison. Another conspirator, James Ujaama, pleaded guilty in 2003 and agreed to cooperate, testifying as a key witness at Abu Hamza's trial.

(Reporting by Tom Brown; Additional reporting by Nate Raymond; Editing by Lisa Shumaker)