Nicole Scott, 32, of Wuppertal Court, Jarrow, picked up the blade and walked off into Wenlock Road, South Shields, at 6.30pm on Friday, June 12.
But within yards police had arrived and ordered her to drop the item, which she did immediately and without any threatening intent.
Magistrates in South Tyneside were told Scott claimed matters inside the property had “got a little out of hand” and that picking up the knife and leaving had seemed her best option.
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Prosecutor Paul Anderson said: “The police get a report of a female with a knife, so they go to Wenlock Road.
“They arrive and they see her fidgeting behind her back, and she throws down to the ground an 8in kitchen knife.
“Police speak to her but in interview, she gives no reply, so we don’t really know what it was about.”
Val Bell, defending, said: “She has pleaded guilty immediately. She is single and has problems with alcohol, she is alcohol dependent.
“She had been to a friend’s address in South Shields. Things had got a little out of hand inside the address.
“She and a male friend had decided to leave. She picked up the knife, it was in the property. She thought that that was the sensible option.
“She should have just left. Things had started to turn unpleasant inside.”
Ms Bell added: “She had not walked far from the property, she had walked for just a short time with the knife.
“Police attend and she was asked to drop the knife which she does immediately.
“She didn’t throw it down, she put it down. She complies fully with the police.”
Scott, who pleaded guilty to possession of a knife in a public place, was told an alcohol treatment requirement would form part of her sentence.
The case was adjourned for reports and she was granted unconditional bail to appear at the same court for sentencing on Wednesday, July 29.