"The U.S. Environmental Protection Agency and the California Air Resources Board revealed their findings that while testing diesel cars of the Volkswagen Group they have detected manipulations that violate American environmental standards," a statement reads.
Chief Executive Martin Winterkorn apologized for the scandal and said Volkswagen had ordered an external investigation of this matter.
Volkswagen company is said to be recalling nearly 500,000 models in the U.S.
Global car makers have been under significant pressure from regulators in the U.S. and Europe in recent years to reduce bad emissions from their cars.
The U.S. has been Volkswagen's weakest market where for years it has struggled to make headway against U.S. and Japanese rivals in the world's biggest car market, according to the report.
Now Volkswagen is facing up to $18 billion in fines.
