Terry Freel, 45, pulled the blade from his sleeve when police drew near at Fellgate Metro station in Jarrow, borough magistrates heard.
But Freel, of no fixed abode, did so to hand it to officers at their request rather than to threaten on Thursday, December 13.
He is facing a jail term after the court was told it was the third time he had been caught carrying a knife in public.
After he pleaded guilty to a charge of possession of a bladed article, magistrates remanded him in custody.
They said they did so in part for his own protection, having heard he had recently risked his safety by wandering onto railway lines.
Prosecutor Ian Martin said: “Officers were called to Fellgate Metro station after a male rang 999.
“He said his head was all over the place and he had a knife.
“When officers arrived, they asked him if he had a knife. He pulled it from his sleeve, and he was arrested. It’s not his first bladed article.”
Mr Martin said the offence carried a six-month jail starting point and queried whether the magistrates' courts sentencing powers were sufficient, due to Freel's previous same offences.
From the dock, Freel pleaded guilty to a charge of possession of a bladed article in public.
Kevin Smallcombe, defending, said: “I would submit that this man has very significant mental health problems which are well-known in the wider community.
“Mental health is at the heart of this. He has been on medication for many years.
“There are real concerns because two weeks ago he was on the railway tracks. He was taken from the tracks."
The court heard Freel has 22 previous criminal convictions from 48 offences.
He is expected to be sentenced at Newcastle Crown Court on Friday, February 11.